Which of the Following Statements About a Consumption Tax Is

question 1

Multiple Choice

Which of the following statements about a consumption tax is false?

• A) Compared to an income tax, a consumption tax would necessarily produce lower revenues for the government in a given year because the portion of income saved is not taxed.
• B) A consumption tax encourages saving, which when invested could lead to increased economic activity.
• C) Under a consumption tax, current consumption is taxed at a lower rate than future consumption
• D) A consumption tax could favor high-income individuals who are likely to save more than low-income individuals.

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