The Main Arguments in Favour of a Modified Flat-Rate Tax

question 36

Multiple Choice

The main arguments in favour of a modified flat-rate tax system (such as a proposal to place a 19% tax on all income over €20,000 with no deductions) are it would

• A) raise more revenue than the current tax system, and it would be simpler.
• B) raise more revenue than the current tax system, and it would lower marginal tax rates.
• C) be simpler and it would lower average tax rates.
• D) be simpler and it would lower marginal tax rates.

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Definitions:

Total Surplus

The sum of consumer and producer surplus, representing the total net benefit to society from the production and consumption of a good.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus how much they actually receive, measured by the area above the supply curve and below the market price.

Government Tax

is a compulsory financial charge imposed by a government on individuals, organizations, or transactions to fund public expenditure.