| Consider the following statements regarding the taxation. |
| 1. To satisfy the idea of justice in taxation, JS Mill has suggested the principle of proportionate in taxation. |
| 2. The modem economists assert that when income increases, the marginal utility of income decreases. |
| 3. The equality of sacrifice can only be achieved if the persons with high incomes are taxed at higher rates and those with low income at lower rates, this is regressive system of taxation. |
| Which of the statements given above are correct? |
A) 1 and 2
B) 2 and 3
C) 1 and 3
D) All of these
Correct Answer: A
Solution :
[a] In order to satisfy the idea of justice in taxation, JS Mill and some other classical economists have suggested the principle of proportionate in taxation. These economists were of the opinion that if taxes are levied in proportion to the incomes of the individuals, it will extract equal sacrifice. The modern economists, however, differ with this view. They assert that when income increases, the marginal utility of income decreases. The equality of sacrifice can only be achieved if the persons with high incomes are taxed at higher rates and those with low income at lower rates. They favour progressive system of taxation, in all modern tax systems.
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