5. Suppose the Government of Georgia determines that a reduction in overall gaso

Question

5. Suppose the Government of Georgia determines that a reduction in overall gasoline consumption is desirable, for both environmental and energy-conservation reasons. One method of curtailing gas consumption would be to institute a "conservation gasoline. To address concems that the surtax imposes a hardship on lower households, the government decides to use the entire proceeds of the surtax to reduce the payroll tax. Each individual will therefore receive a lump-sum tax rebate. (Here the term "lump sum" means that the rebate does not vary with the amount of gasoline the individual consumes.) For simplicity, we shall assume, reasonably, that the costs of administerine the policy are negligible. A critic might ask, "Why bother? If you give all the surtax revenues back to people, then they will just go out and spend their rebates on gasoline; giving the tax surtax" on income proceeds back defeats the purpose of the policy." Do you agree? Analyze using graphical approach. Can you think of any other unintentional consequences of such policy?

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Answer to question number 5- hare and the given question government of Georgia for reducing the consumption of gasoline plans to charge conservation surtax on gasoline not government also think that it will create a heart shape on lower income households so for this purpose government has plan that it will give lump sum tax rebate to all. so as we can see the concern of the government is that the increase in consumption of gasoline but it is also of opinion that conservation surtax will create a problem for lower income household groups to overcome this problem the government is ready to give tax rebate overall. accretive in your in this situation say that giving back the surtax revenues is not a good idea because returning the money would lead in use of that money again for buying gasoline. this observation of giving back surtax revenue is quite considerable and correct because if government give the money to the people from whom they have collected will reduce the purpose of the tax overall because they will have the amount of tax in their hand and they will probably use that money again in gasoline consumption. well this is one observation but it is also so that charging tax on gasoline will have more adverse effect for the lower income group. government share is trying to think for the lower income group but the bathymetric which they are applying is not effective because will have not that affect in consumption of gasoline as a government is expecting because of levying tax. it is also true that it if tax return back to the people from which tax is being collected then it will defeat the purpose of the policy because policies aiming at reduction of gasoline consumption because being applied on it but if government will return the tax in form of tree way to the people when part of the money collected from them which was collected so that we cannot use it in consuming gasoline will not have any effect as that money will be again in the hands of the people in form of lump sum tax rebate. so we can hear say that giving tax rebate but somehow defeat the purpose of the policy.

there can be other unintentional consequence of such policy which is that if in future whenever government will impose any tax the people will expect government to give some sort of rebate in tax always. the expectation from government of tax rebate will increase from government which will leave government in a problem and to the side of this situation would be such taxes in future would not be taken seriously by the public at large. so in my opinion the approach of the tax rebate is not that effective if we see the purpose for which policy is being implemented

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