One advantage of a lump-sum tax over other taxes is that it
A)is both equitable and efficient.
B)doesn't cause deadweight loss.
C)would place a larger tax burden on the rich.
D)would raise more revenues.

Question

Quizplus · Accepted Answer

A lump-sum tax is a fixed amount of tax that does not depend on income or consumption. Since it does not affect behavior, it does not create deadweight loss, which is a loss of economic efficiency due to taxes discouraging certain activities. Therefore, option B is the correct answer. Options A and C are not necessarily true for all cases. Option D is not necessarily true since the amount raised by a lump-sum tax is fixed and does not depend on the level of income or consumption.

One Advantage of a Lump-Sum Tax Over Other Taxes Is