The empirical evidence suggests that a modest increase in income tax rates would

Question

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Studies have shown that a modest increase in income tax rates does not significantly reduce the incentive to work. While a larger increase in taxes may lead to a reduction in hours worked, a modest increase would not have a significant impact on labor supply. Options A and E are incorrect as research has not shown evidence for a significant reduction in hours worked or wealthy individuals leaving the country due to a modest tax increase. Option C is incorrect as the elimination of income inequality through tax policy is a complex issue that cannot be solved solely by a modest tax increase. Option D is also incorrect as a modest increase in tax rates would generally lead to an increase in tax revenue.

The Empirical Evidence Suggests That a Modest Increase in Income