Optimal commodity taxation would
A) put a tax on leisure time,which is currently untaxed.
B) have the smallest amount of excess burden possible for a given amount of tax revenue.
C) optimize tax rates on the wealthiest Americans.
D) eliminate tax evasion in the United States.

Question

Quizplus · Accepted Answer

Optimal commodity taxation aims to minimize the excess burden (deadweight loss) of taxation while still generating the desired amount of tax revenue. This means finding the most efficient tax rate and base to minimize the distortions caused by taxation, rather than targeting certain groups or activities. Taxing leisure time (A) would be difficult to implement and would likely be unpopular, while optimizing tax rates on the wealthiest Americans (C) may not necessarily lead to the most efficient tax system. Similarly, while reducing tax evasion (D) is important, it is not the sole focus of optimal commodity taxation.

Optimal Commodity Taxation Would