Events and circumstances surrounding the whiskey rebellion are described in the video produced by Historical Spotlight http://historicalspotlight.com/the-whiskey-rebellion-video/ or http://www.youtube.com/watch?v=hX9gKS7uMZY. In Chapter...

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Events and circumstances surrounding the whiskey rebellion are described in the video produced by Historical Spotlight http://historicalspotlight.com/the-whiskey-rebellion-video/ or http://www.youtube.com/watch?v=hX9gKS7uMZY.

In Chapter 7, Paul Krugman and Robin Wells present the economic analysis of excise taxes and discuss various issues surrounding excise taxes. Two issues discussed are the incidence of taxes, i.e. who really bears the cost of taxes, and principles of tax fairness including the benefits principle.

1. From the historic information presented in the video, discuss whether you believe that the excise tax placed on whiskey to pay for the national debt incurred during the U.S. Revolutionary War can be justified by the benefits principle or if some other explanation seems more appropriate. In addressing this question, be sure to define what is meant by the benefits principle.

2. Based on the economics of tax incidence, discuss how the intensity of protest over imposition of the excise tax on whiskey to pay for the national debt incurred during the U.S. Revolutionary War may be related to the supply and demand elasticities of whiskey during the late 1700’s. Assume that the demand for whiskey was elastic during the late 1700’s and that the supply of whiskey produced in the frontier regions of the country was inelastic during this time period.

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