Question 1
Double taxation of saving may
◦ increase the saving rate.
◦ increase the rate of investment.
◦ reduce the rate of economic growth.
◦ increase the national debt.
Question 2
All of the following statements are true
except
◦ an income tax taxes savings twice only if consumption is the measure used to gauge a person's ability to pay.
◦ proponents of income as a tax base argue that you should be taxed on what you draw out of the common pot instead of on the basis of your ability to draw from the pot.
◦ the double taxation of saving tends to reduce the saving rate.
◦ at this time, there is not clear consensus on what the best tax base is.