Question

To fully understand how taxes affect economic well-being, we must compare the a. benefit to buyers with the loss to sellers. b. price paid by buyers to the price received by sellers. c. profits earned by firms to the losses incurred by consumers. d. decrease in total surplus to the increase in revenue raised by the government.

Answer 1

Answer:

It doesn't matter if the taxes are set upon the consumers or the producers, the difference between what the consumers pay and what the producers receive is the same. No one benefits from taxes, sellers lose and buyers lose.

Taxes are a necessary evil, but no one can argue that they benefit anyone, at least no one that works and pays them. Probably someone who doesn't work and just lives with the money they receive from government assistance programs might like taxes.

Taxes decrease total surplus, they decrease supplier surplus and they decrease consumer surplus.

The ideal scenario would be that the government uses their evil taxes and invest them well in good services that help society, but in the real world that doesn't happen all the time. Governments use taxes to pay for public goods like roads, security services, education, health, etc., and that is great.  The problem is that they also spend $1 billion per plane because the plane manufacturer donates huge amounts to presidential candidates. Or the incredible amount of assistants, secretaries and other staff that each politician has and we pay for them all. When the government uses money efficiently, the social benefit exceeds the social cost of taxes, but efficiently is the keyword.