Explain why regressive taxes may be necessary

Question 1. The increased suburbanization of urban population was an important social phenomenon of the 1960s and 1970s in metropolitan areas in the United States. Explain how the decision to migrate to another jurisdiction in a metropolitan area is influenced by policies of central city and suburban government policies. What steps could central city government use to encourage the return of the middle-income class to the city? Explain why regressive taxes may be necessary to retain middle- and upper-income residents in the city.

Question 2. A 10-percent tax is levied on the sale of soft drinks. This tax is collected from the sellers of the drinks. A critic of the tax argues that the sellers will shift the entire tax to the buyers and therefore be no worse off. Evaluate this argument by showing the market conditions that would have to prevail for the prediction to be correct. Indicate under what circumstances the tax will be shared by the buyers and the sellers of soft drinks.

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Taxation: Explain why regressive taxes may be necessary
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