The Benefits-Received Principle of Taxation Is Not Often Used Because

question 44

Multiple Choice

The benefits-received principle of taxation is not often used because

• A) if tax payments are linked to the benefits received, taxpayers tend to overstate the benefits that they receive from public goods.
• B) it leads to an overproduction of public goods.
• C) it is difficult to determine the values individual taxpayers place on goods and services that are produced using tax revenue.
• D) it leads to less equality in the after-tax distribution of income.

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Definitions:

Indirect Method

A cash flow reporting technique that starts with net income and adjusts for cash-based transactions.

Operating Activities

Business activities related directly to the production, sale, and delivery of a company's products or services, often reflected in its cash flow.

Fixed Asset

Long-term tangible assets held for business use and not expected to be converted to cash in the coming fiscal year, such as buildings, machinery, and equipment.

Direct Method

An approach to preparing the cash flow statement that lists actual cash inflows and outflows from operating activities.