When different consumers pay different amounts of taxes,Ricardian equivalence may fail because
A) alternative ways of collecting the same tax revenue can have different welfare effects.
B) consumers can become jealous of one another.
C) such differences in taxes create credit market imperfections.
D) higher taxes on more talented people may be politically popular.
E) such differences in taxes create welfare losses to the business community.

Question

Quizplus · Accepted Answer

Ricardian equivalence assumes that consumers respond the same way to changes in taxation, regardless of their income level or tax burden. However, if different consumers pay different amounts of taxes, then alternative ways of collecting the same tax revenue can have different welfare effects on different groups of consumers. This can lead to a failure of Ricardian equivalence.

When Different Consumers Pay Different Amounts of Taxes,Ricardian Equivalence May