A governor is concerned about his state’s budget deficit. He
does not want to reduce spending so he has decided to raise taxes.
He is thinking about increasing taxes on the sellers of gasoline
because he believes that this will increase tax revenues
substantially and he wants the rich gasoline companies to bear the
burden of the tax increases, not everyday consumers. He is
proposing that gasoline sellers pay the state government 50 cents
for every gallon sold in his state. Using economic theory, explain
whether this tax on gasoline sellers will achieve his goals and why
or why not? Would a similar tax on soda be better?