In designing a tax system, the government considers the conflicting goals of efficiency and equity.

Question

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Efficiency in taxation refers to the ability of the tax system to raise revenue without causing significant distortions in economic behavior. Equity, on the other hand, refers to the distributional effects of taxation and the extent to which it promotes fairness and social welfare. These two goals can often clash, as policies that promote equity may reduce efficiency and vice versa. Therefore, designing a tax system requires reconciling these conflicting goals.

In Designing a Tax System, the Government Considers the Conflicting