Raising the tax rate on essential goods—a traditional means of increasing government revenues—invariably turns low- and middle-income taxpayers against the government. Hence government officials have proposed adding a new tax on purchases of luxury items such as yachts, private planes, jewels, and furs. The officials claim that this tax will result in a substantial increase in government revenues while affecting only the wealthy individuals and corporations who can afford to purchase such items. The answer to which one of the following questions would be most relevant in evaluating the accuracy of the government officials’ prediction?
(A) Will luxury goods be taxed at a higher rate than that at which essential goods are currently taxed?
(B) Will the revenues generated by the proposed tax be comparable to those that are currently being generated by taxes on essential goods?
(C) Will sales of the luxury items subject to the proposed tax occur at current rates once the proposed tax on luxury items has been passed?
(D) Will the proposed tax on luxury items win support for the government in the eyes of low- and middle-income taxpayers?
(E) Will purchases of luxury items by corporations account for more of the revenue generated by the proposed tax than will purchases of luxury items by wealthy individuals?