Discussion Questions – Taxes – Chapter 7

1) What do you think are the circumstances when a seller can pass the full amount of an excise tax on to consumers? For example, do you think that the state excise tax on gasoline is completely passed on to consumers in Pennsylvania? If these products had an excise tax placed on them, who would wind up paying most of the tax and why?

• GGasoline

• SSuper Bowl tickets

• LLuxury cars

• CCigarettes

• Bourbon

Explain your answers.

2) Taxes inherently cause inefficient allocation of resources and therefore should be minimized if not completely eliminated and replaced with user fees for public services. Discuss the merits and/or flaws in this statement.