Any tax whose burden depends on the outcome of an economic decision can be expected to create an economic distortion.

Question

Quizplus · Accepted Answer

This statement is true. Taxes that are linked to economic decisions, such as taxes on certain goods or services, can alter people's behavior and create market inefficiencies. These taxes create a distortion in the market by influencing the supply and demand of the taxed goods or services. This can lead to a misallocation of resources and reduce overall economic welfare. Therefore, it is generally preferred to have taxes that are broad-based and do not distort economic decisions.

Any Tax Whose Burden Depends on the Outcome of an Economic