Question

Consider the following two taxes: 1) a state imposes a 10 cent tax on every gallon of gasoline sold in the state to pay for road maintenance and improvements, and 2) a state imposes an additional 1% income tax on all state residents to pay for the construction of 50 new soccer fields throughout the state. Which of these two taxes is more consistent with the benefits-received principle? Why?

Answer 1

Answer - 10 cent tax on the gasoline for the maintainance of road will be more consistent with the benefits recieved by the residents. The roads and highways are used by every person of the society , they provide more benefits to the people and the non maintainance will lead to more accidents and losses. On the other hand , the soccer fields are not used by every section of society but limited people. Imposing of 1% more income tax on every state resident will not be consistent with the benefits received as benefits are received by limited population here.