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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Some states exclude necessities, such as food and clothing, from their sales tax. Other states do not. Discuss the merits of this exclusion. Consider both efficiency and equity.

To determine
Merit of excluding necessary goods from taxation.

Explanation

Since, poor people spend a large proportion of their income on food and clothing, excluding food and clothing from the sales tax is justified on equity grounds. By exempting food and clothing from taxation, a greater burden of taxation is levied on the rich than the poor...

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