Final answer:
It is false that consumers would be indifferent between a head tax and an income tax even if the tax bill remains the same under both. Different tax types can affect economic behavior and the perception of fairness due to differences in equity and efficiency; additionally, tax incidence affects who truly bears the tax burden.
Step-by-step explanation:
It is false to assume that a consumer will be indifferent between a head tax and an income tax if the tax bill is the same under both scenarios. A head tax, which is a fixed amount paid by all taxpayers, does not take into account the taxpayer's ability to pay and could be more burdensome on lower-income individuals. An income tax, however, is generally progressive and taxes individuals based on their income levels, which can align more closely with their ability to pay. Important considerations such as the principles of equity and efficiency in tax systems are relevant to understanding this difference.
Further, the type of tax can affect the consumer's decision-making and economic behavior. An income tax could potentially disincentivize earning additional income due to progressive brackets, while a head tax does not change with income earned. Knowing how tax burdens are distributed (tax incidence) is crucial, since if demand is more inelastic than supply, consumers bear most of the tax burden, and conversely if supply is more inelastic, sellers bear most of the burden.