When the government reduces my income tax by $0.30 for every $1.00 that I contribute to a charity, the government is effectively
A)alleviating the negative externalities that are associated with charitable giving.
B)imposing a negative externality on those who do not pay income taxes.
C)encouraging a private solution to a positive-externality problem.
D)encouraging a private solution to a negative-externality problem.

Question

Quizplus · Accepted Answer

By reducing income tax for those who contribute to charity, the government is incentivizing individuals to engage in private solutions to positive-externality problems rather than relying on government intervention. This is because charitable giving provides benefits to society as a whole, but individuals may not have a strong incentive to give if they do not directly benefit. By reducing income tax, the government is effectively lowering the price of charitable giving and encouraging individuals to contribute to the public good.

When the Government Reduces My Income Tax by $0