ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Increased economic growth will lead to increased output and consumption. This causes an increase in pollution. Increased pollution from economic growth will cause health problems such as asthma and therefore will reduce the quality of life.

Detailed explanation-2: -Economic growth increases state capacity and the supply of public goods. When economies grow, states can tax that revenue and gain the capacity and resources needed to provide the public goods and services that their citizens need, like healthcare, education, social protection and basic public services.

Detailed explanation-3: -Second, tax collection and structure of it create distortionary impacts in the economy through tax burden. Thus, the positive and negative impact of tax made the ‘tax–growth’ relationship more complex and the structure of taxation has a definite role in the development process of an economy.

Detailed explanation-4: -As the government increases the tax rate, the revenue also increases until T*. Beyond point T*, if the tax rate is increased, revenue starts to fall. In short, attempts to tax above a certain level are counterproductive and actually result in less total tax revenue.