Taxes are costly to market participants because they transfer resources from those participants to the government, even though they do not usually distort incentives or resource allocation.

Question

Quizplus · Accepted Answer

Taxes are costly to market participants not only because they transfer resources from those participants to the government, but they also can distort incentives and affect resource allocation, leading to inefficiencies such as deadweight loss.

Taxes Are Costly to Market Participants Because They Transfer Resources