Part A:

A stable tax is one that grows at a predictable pace. Predictable growth makes it easier for lawmakers to
put together budgets that match anticipated revenues to spending. But stability is not enough to achieve
adequacy in the long run. For example, property taxes grow predictablybut tend to grow more slowly
than the cost of the services that governments provide. Elasticity is a measure of whether the growth in
tax revenues keeps up with the economyan important consideration because the cost of providing
public services usually grows at least as fast as the economy. An elastic tax system is one that grows
faster than the economy during good times, and falls faster than the economy during bad times. Over the
course of the business cycle, elastic taxes like the personal income tax help to ensure adequate revenue
streams.
The State of Minnesota was relying on property and income taxes while property taxes depict stability but
little elastic behavior as these taxes grow in slow rate. On the other hand, the income taxes has depicted
elastic behavior as these taxes grow with the economy. The state was planning to change its reliance from
property and income taxes to property taxes and sales taxes to achieve more elastic type of tax income in
economic growth period. Also, it is important to note that sales taxes depict regressive tax system that
will impact heavily on the low or middle income group to pay taxes in high proportion of their income.
Part B:
No doubt, the taxation system of any country is based on the concept of equity and the major focus in
some countries is on vertical equity or in some countries on the horizontal equity. But the main purpose of
the taxation system is to be fair enough to collect higher taxes from the high income group and low taxes
from the low income group. The vertical equity method is dependent on the regressive, progressive or
proportional equity system to create a balance of equity for the taxation purpose in the economy. Any
imbalance in the overall taxation procedures will impact heavily on the leverage of the taxation with
respect to the income class. Further, this can result in income disparity and can result in resistance on the
part of tax payers.
So, the effective and balance taxation system is the main purpose of any country taxation system and if
any taxation system that doesnt create balance in equity of the taxpayers can result in resistance of the
tax payers and income disparity.