In order to minimize the DWL of a tax, should the government levy tax on groceries or meals at fancy restaurants? Is it fair? Please explain.

DWL of a tax refers to the decline in the standard of living of the people due to taxes imposed by the government. It states how taxes affect the production or consumption of the people.

When governments levy a tax on groceries, it will increase the deadweight loss of the tax as grocers are the necessity goods. Both rich and poor will affect if the government imposes a tax on the grocery. It will decrease the consumer surplus and hence reduces social welfare.

On the other hand, when governments levy a tax on meals at fancy restaurants, it will affect the rich people of society. Taxes on meals will increase the price due to which people will demand lesser than earlier demand. Deadweight loss is less in this case because people have alternatives to having a meal at a fancy restaurant.