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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Will tax revenue necessarily rise if tax rates are lowered? Explain your answer.

To determine

Identify whether a rise in income tax rates increases the income tax revenue or not.

Explanation

The relation between the income tax rate and the income tax revenue depends on the amount of tax base. That means, an increase in income tax revenue is up to the percent rise in tax rates, which is higher than or lower than the percent fall in the tax base. It is explained using an example. Suppose the tax rate is 10% and the tax base is $100, then obviously the tax revenue revue will be $10(100×10/100)

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