If a government decides to move from a regressive tax system to a progressive tax system,there will be a(n)________ in equity and a(n)________ in efficiency.

Question

Quizplus · Accepted Answer

Moving from a regressive tax system to a progressive tax system means that the tax burden is shifted from low-income households to high-income households, resulting in an increase in equity. However, a progressive tax system may reduce efficiency by discouraging work, savings, and investments among high-income earners who are burdened with higher tax rates. Therefore, there will be a decrease in efficiency. Thus, option C is the correct answer.

If a Government Decides to Move from a Regressive Tax