A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Question

Quizplus · Accepted Answer

A low marginal tax rate means that taxpayers are able to keep more of their income and are therefore more likely to work harder and/or invest more, resulting in a more efficient use of resources. A higher marginal tax rate, on the other hand, may discourage work or investment and result in less economic activity and efficiency, as well as potentially higher deadweight loss from the tax.

A Tax System with a Low Marginal Tax Rate Generates