One of the basic trade-offs inherent in designing a tax system is between:

Question

Quizplus · Accepted Answer

Efficiency and equity are two important goals in designing a tax system. Efficiency aims for the tax system to collect the required revenue with minimum economic inefficiency, while equity aims for a fair distribution of the tax burden among taxpayers. The trade-off arises because policies that promote efficiency (e.g. low tax rates and broad tax bases) may not always be the most equitable, and policies that promote equity (e.g. progressive taxation) may not always be the most efficient. Therefore, tax systems must strike a balance between efficiency and equity.

One of the Basic Trade-Offs Inherent in Designing a Tax