The resources that a taxpayer devotes to complying with the tax laws are a type of
A)consumption tax.
B)value-added tax.
C)deadweight loss.
D)producer surplus.

Question

Quizplus · Accepted Answer

The resources that a taxpayer devotes to complying with the tax laws are a type of deadweight loss, also known as efficiency loss. Deadweight loss occurs when the cost of producing a good or service outweighs the benefits it provides to the society as a whole. In the case of taxes, deadweight loss arises because taxpayers and the government must devote resources to activities such as tax planning, recordkeeping, and compliance that do not produce any real output or value to society. These resources represent a net loss to the economy as they are diverted from more productive uses.

The Resources That a Taxpayer Devotes to Complying with the Tax