Q. 75.0( 2 Votes )

Tax on income or tax on commodities. Which of the two affects the rich more and which affects the poor more? Explain with reasons.

Answer :

Tax on income affects the rich more. Income tax is levied on people who have income above a particular threshold. They will be more affected by income tax as higher income results in the levy and collection of higher taxes from them. The consumption of these sections remains relatively unresponsive to changes in income. Thus they are not affected by the tax on commodities. Rather, a higher rate of income taxes can have an effect on them.

Tax on commodities affected the poorer sections of society. If the commodities they consume are taxed more, they would be compelled to pay a higher price for the commodities and services. This affects their cost of living and standard of living. Thus the poorer sections are affected by commodity taxes more than income taxes.

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