Question

11.Washington Postcolumnist George Will once wrote the following:“Corporations do not pay [sales] taxes; they collect them, passing the burdento consumers as a cost of production.” - George Will (2010)What is the main problem with Will’s statement?

(A) Corporations are subject to other taxes, such as capital gains and earned interest.

(B) Producers and consumers share the burden of taxation, according to supply anddemand elasticities.

(C) Legal ramifications for tax evasion include fines and imprisonment, thus deterringcorporations from such behaviour.

(D) None of the above.

Answer 1

The answer is B.

i.e. Producers and Consumers share the burden of taxation, according to supply and demand elasticities.

When demand is more elastic than supply, producers will bear more of the burden of a tax than consumers will. For example, if demand is twice as elastic as supply, consumers will bear one-third of the tax burden and producers will bear two-thirds of the tax burden. In most cases, the consumer will end up paying the tax in cases where the supply is more elastic than the demand