A comprehensive income tax is more favorable to the incentive to save than a comprehensive consumption tax.

Question

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A comprehensive consumption tax is more favorable to the incentive to save because it taxes consumption instead of income or savings. Individuals who save more and consume less will be taxed less, incentivizing savings behavior. On the other hand, a comprehensive income tax taxes both income and savings, potentially disincentivizing people from saving.

A Comprehensive Income Tax Is More Favorable to the Incentive