Suppose New York City passes a local "big gulp" tax that taxes carbonated beverages larger than 20 ounces if they contain sugar or high fructose corn syrup. If the revenue from the "big gulp" tax is earmarked for diabetes research, the "big gulp" tax may be justified
A)on the basis of the ability-to-pay principle.
B)because it is an example of a lump-sum tax and thus is the most efficient tax.
C)on the basis of the benefits principle.
D)because it is an example of a progressive tax and thus is the most equitable tax.

Question

Quizplus · Accepted Answer

The justification for the "big gulp" tax is based on the benefits principle, which states that those who benefit from government services or programs should pay in proportion to the amount of benefit received. In this case, the revenue from the tax is earmarked for diabetes research, which is a benefit to those who suffer from the disease. The ability-to-pay principle is not relevant in this case, since the tax is not based on income or ability to pay. The tax is not an example of a lump-sum tax, as it is based on the size and content of the beverage. It is also not a progressive tax, as it does not tax at a higher rate based on income.

Suppose New York City Passes a Local "Big Gulp" Tax