Question

Are the following statements about taxes true, false, or uncertain? Support your answer from an economic perspective

1. Because taxes create deadweight losses, reducing income taxes will (always) benefit society as a whole.
2. A large (50%) tax on Irish Whiskey would be an effective way to fund programs to eliminate alcoholism.
3. A large (50%) tax on Irish Whiskey would be an effective way to eliminate (or substantially reduce) alcoholism.

Answer 1

1 - True

Taxes impose the extra cost upon the society. Be it consumer or producer , taxes create deadweight loss. Hence the decrease in tax rates will increase the total surplus of the economy

2 - True

The increase in tax on whiskey can be used to increase the revenue of the government and can be used for funding any program

3 - Uncertain

This is because the reduction in whiskey is certian. This depends upon the elasticity of demand for whiskey. If demand will be inelastic , imposing tax will not reduce demand and alcoholism.