Which of the Following Statements Is Concerned with Equity Rather

question 66

Multiple Choice

Which of the following statements is concerned with equity rather than efficiency?

• A) Almost all taxes create some amount of deadweight loss.
• B) Excise taxes tend to raise prices for consumers and reduce sales for firms.
• C) Tax rates on the wealthy are too low and should be raised.
• D) The incidence of a tax does not depend on who actually pays it.
• E) Taxes generate revenues that governments spend on services.

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Definitions:

Temporary Differences

Differences between the tax basis of an asset or liability and its carrying amount in the financial statements, which will result in taxable or deductible amounts in the future.

Permanent Differences

Differences between taxable income and accounting income that arise due to items recognized in one manner for accounting purposes and in another manner for tax purposes, and they do not reverse over time.

Permanent Differences

Differences between taxable income and accounting income that originate in one period and do not reverse over time, affecting the effective tax rate.

Temporary Differences

Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base, leading to deferred tax assets or liabilities.