When the minimum marginal penalty for tax evasion is greater than the maximum marginal tax rate,theory suggests that tax evasion will be
A)greater than 1.
B)($\infty$).
C)0.
D)100.

Question

Quizplus · Accepted Answer

When the minimum marginal penalty for tax evasion is greater than the maximum marginal tax rate, tax evasion will be discouraged as the penalty for getting caught will be higher than the amount saved from evading taxes. This leads to a situation where tax evasion is not an optimal strategy, and taxpayers will prefer to pay their fair share of taxes. Hence, the level of tax evasion will be close to zero. Therefore, the best choice is C.

When the Minimum Marginal Penalty for Tax Evasion Is Greater ∞\infty∞

When the Minimum Marginal Penalty for Tax Evasion Is Greater $\infty$