Which of the following statements about the ‘Why Pay Tax?’ and ‘Sources and Uses of Tax’ sections of the lecture material are TRUE: A common ‘myth’ about taxation is that most of it goes to paying the salaries of politicians. This myth is false because the majority of government expenditure is on the provision of important services to the community and social security. There is some debate about the ‘right level’ of government involvement in the economy. Some argue that the government can solve problems in the economy better than the private sector and so advocate a larger role for government. Others advocate that excessive government involvement tends to create inefficiencies over the long-term.

Question

BlackTom AI · Accepted Answer

Let’s break down the two statements presented in the question and examine each in turn.
Option 1: “A common ‘myth’ about taxation is that most of it goes to paying the salaries of politicians. This myth is false because the majority of government expenditure is on the provision of important services to the community and social security.” This option asserts that the myth is false and that most spending goes to services and social security. In many educational materials about taxation, the allocation of spending is indeed described as heavily weighted toward public services (health, education, infrastructure) and social security programs, rather than salaries of politicians. Therefore, this statement is consistent with typical explanations and is plausible as true.
Option 2: “There is some debate about the ‘right level’ of government involvement in the economy. Some argue that the government can solve problems in the economy better than the private sector and so advocate a larger role for government. Others advocate that excessive government involvement tends to create inefficiencies over the long-term.” This option presents a balanced view of one classic public economics debate: optimal government involvement. It acknowledges both proponents of a larger government role and critics who fear inefficiencies from overreach. This characterization aligns with mainstream economic discussions about fiscal policy, regulation, and government intervention, making this statement also plausible as true.
Considering the content of both statements, they are not presenting contradictory claims; rather, they reflect common, overlapping themes found in discussions about taxation and public expenditure. The first emphasizes the composition of spending, while the second highlights the ongoing debate over the extent of government involvement. Since both statements appear to be accurate representations of the material described, each one is true in its own right.

In summary, neither statement is false; together they indicate that both statements are true. Therefore, the option that says “Both statements are true (neither are false)” is the correct choice.

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