Why Do Some Policymakers Support a Consumption Tax Rather Than

question 308

Multiple Choice

Why do some policymakers support a consumption tax rather than an earnings tax?

• A) Because the average tax rate would be lower under a consumption tax.
• B) Because a consumption tax would encourage people to save earned income.
• C) Because a consumption tax would raise more revenues than an income tax.
• D) Because the marginal tax rate would be higher under an earnings tax.

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Definitions:

Negotiable Instruments

Financial documents that promise payment to the bearer or named party and can be transferred by endorsement or delivery, such as checks, promissory notes, and bills of exchange.

Writing Requirement

A legal criterion under certain statutes, such as the Statute of Frauds, that mandates certain contracts must be in written form to be legally enforceable.

Promissory Note

A written promise to pay a specified sum of money to a designated person or entity, at a determinable future time or on demand.

Revolving Line of Credit

A credit arrangement that allows a borrower to use, repay, and re-borrow funds up to a specified credit limit.