Which of the following is an advantage of earmarked taxes?
A)They are flexible.
B)They never lead to overproduction.
C)They make it more difficult for politicians to alter the expenditure mix away from their preferences.
D)They make it easier for politicians to alter the expenditure mix to achieve economic efficiency.

Question

Quizplus · Accepted Answer

Earmarked taxes make it more difficult for politicians to alter the expenditure mix away from their preferences because the revenue collected from earmarked taxes can only be spent on specific programs or projects that are outlined in the legislation authorizing the tax. This limits the discretion of politicians in allocating funds to other programs or projects that may be more politically popular but not necessarily more beneficial for society.

Which of the Following Is an Advantage of Earmarked Taxes