Explain why income taxes distort labour and capital markets

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Many people argue that a consumption tax is preferable to an income tax, because while income taxes distort both labour and capital markets, consumption taxes only distort labour markets.

a. Explain why income taxes distort labour and capital markets

b. Explain why consumption taxes only distort labour markets

c. Does the fact consumption taxes distort only one market, while income taxes distort two, make consumption taxes preferable? Explain.

Reference no: EM131072075

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