Question

Some colleges charge all students the same “activity fee.” Suppose that students differ by how many campus activities they engage in. This charge is most like a. an excise tax which conforms to the benefits principle. b. an excise tax which violates the benefits principle. c. a lump-sum tax which conforms to the benefits principle. d. a lump-sum tax which violates the benefits principle.

Answer 1

Answer: (d.) A lump-sum tax which violates the benefits principle.

Explanation:

Here the tax is an amount, i.e. it is lump-sum and it violates benefit principle because they are not taxed according to their willingness to pay.

Also a same fee is charged from all the students irrespective of their level of activity, i.e. a lump sum tax.

Therefore it is violating the benefits principle because the fee is independent of the campus activities. A student might be receiving greater benefits than the other in terms of higher campus activities but is paying the same fee.