Asked by Danielle Szajdek on Jun 18, 2024
Verified
The government imposes a luxury tax on automobiles that cost more than $40,000. As a result, fewer individuals purchase cars that cost more than $40,000. This is an example of
A) tax equity.
B) tax shifting.
C) tax evasion.
D) tax incidence.
Luxury Tax
A tax imposed on expensive goods and services, often considered non-essential, as a means of raising government revenues without placing the burden on essential items.
Tax Incidence
The distribution of the economic burden of a tax between buyers and sellers, depending on the elasticity of demand and supply.
- Acquire knowledge about the consequences of tax policies on economic actions, focusing on tax incidence and the shifting of tax responsibilities.
- Analyze the effects of specific taxes, such as luxury taxes and payroll taxes, on market behavior and economic equilibrium.
Verified Answer
DS
Danielle SmithJun 20, 2024
Final Answer :
B
Explanation :
Tax shifting occurs when the burden of a tax is passed on from the entity legally responsible for it to another party, in this case, from the sellers (or manufacturers) of luxury automobiles to the buyers, leading to a decrease in demand for cars costing more than $40,000.
Learning Objectives
- Acquire knowledge about the consequences of tax policies on economic actions, focusing on tax incidence and the shifting of tax responsibilities.
- Analyze the effects of specific taxes, such as luxury taxes and payroll taxes, on market behavior and economic equilibrium.