The Minister for Finance is proposing a new ‘cat tax’ of €50 per annum on every pet cat in the country. Economists have questioned how it will be possible to work out who owns each cat in the country. However, the Minister has brushed aside their concerns as ‘minor details’. She hopes to introduce the tax in the next budget.
(a) Who is likely to benefit from this policy? (b) Who is likely to pay for this policy? (c) Is it financially sustainable?
Discussion
A general election is underway to elect a new government. To help win votes, one political party wants to reduce taxes by €4 billion and to increase spending on ‘badly needed public services’ by €5 billion. As a result, the party’s support is rising in the opinion polls. Some economists have criticised the party’s election promises as being reckless, describing it as ‘bribing taxpayers with their own money’. They say it will lead to further increases in the already large government debt. 1. What would the total cost be to (a) the government and (b) tax payers if the above election promises were implemented?
2. Who would benefit from reducing taxes by €4 billion? 3. What is the opportunity cost of reducing taxes by €4 billion? 4. Who would benefit from increased government spending on public services?
