“The state has decided to increase funding for public education.
They are considering four alternative taxes to finance these
expenditures. All four taxes would raise the same amount of
revenue.” Here are the lists of options:
1. A sales tax on food.
2. A tax on families with school-age children.
3. A property tax on vacation homes.
4. A sales tax on jewelry.
Answer the following questions. Be prepared to discuss your
A. Taxes change incentives. How might individuals change their
behavior because of each of these taxes?
B. Rank these taxes from least deadweight loss to most
deadweight loss. Explain.
C. Is deadweight loss the only thing to consider when designing
a tax system?