A consumption tax that replaces an income taxa. only taxes a household on the money it spends.b. ultimately taxes income twice-once when the household pays income tax and once when the householdmakes a purchase.c. discourages saving.d. would likely result in a lower level of saving than an income tax.

The characteristics of a consumption tax that replaces an income tax. Let's analyze the options: a.…

Answered: A consumption tax that replaces an…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section: Chapter Questions

Problem 1WNG

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"Discuss the Impact of Taxes on Household Savings in the United States"
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A consumption tax that replaces an income tax a) only taxes a household on the money it spends. b) discourages saving. c) would likely result in a lower level of saving than an income tax. d) ultimately taxes income twice—once when the household pays income tax and once when the household makes a purchase
Economics
Suppose an individual decreases their consumption in a year, resulting in more saving for and consumption in the next year. In a taxation system that taxes consumption but not interest income, what will happen to this individual's present value ilfetime tax burden? Ot will Increase. It will decrease. OIt will stay the same.
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