What does 'Economy' refer to in Adam Smith's principles of taxation?

What does 'Economy' refer to in Adam Smith's principles of taxation?

• A. Taxes should be levied based on wealth.
• B. Taxes should be easy and inexpensive to administer.
• C. Taxes should have clear rules.
• D. Taxes should not be confusing.

Answer: (B)

In Adam Smith's principles of taxation, 'Economy' primarily refers to the ease and cost-effectiveness of administering taxes. This principle emphasizes that a good tax system should be straightforward to implement and manage, thereby minimizing administrative burdens on both the government and taxpayers. If a tax is expensive to collect or overly complex, it undermines the efficiency of the tax system as a whole. When taxes are easy and inexpensive to administer, they can be collected consistently and generate stable revenue for the government without requiring excessive resources. This principle promotes not only efficiency but also fairness, as it ensures that the costs associated with tax collection do not detract from the overall revenues generated. Thus, prioritizing economy in taxation is crucial for achieving an effective and sustainable tax system, which aligns with Smith's vision of a well-functioning economy where resources are used wisely.

In Adam Smith's principles of taxation, 'Economy' primarily refers to the ease and cost-effectiveness of administering taxes. This principle emphasizes that a good tax system should be straightforward to implement and manage, thereby minimizing administrative burdens on both the government and taxpayers. If a tax is expensive to collect or overly complex, it undermines the efficiency of the tax system as a whole.

When taxes are easy and inexpensive to administer, they can be collected consistently and generate stable revenue for the government without requiring excessive resources. This principle promotes not only efficiency but also fairness, as it ensures that the costs associated with tax collection do not detract from the overall revenues generated. Thus, prioritizing economy in taxation is crucial for achieving an effective and sustainable tax system, which aligns with Smith's vision of a well-functioning economy where resources are used wisely.