Income taxes are an automatic stabilizer because when income rises,ceteris paribus,tax receipts
A)Fall because automatic stabilizers work against the cyclical movements of the GDP.
B)Rise because taxes are computed on the basis of income.
C)Fall because income taxes are regressive.
D)Fall as taxpayers experience bracket creep.

Question

Quizplus · Accepted Answer

Income taxes are computed on the basis of income, so when income rises, tax receipts also rise. This helps stabilize the economy by moderating the increase in income and reducing the overall growth rate, which can help prevent overheating and inflation.

Income Taxes Are an Automatic Stabilizer Because When Income Rises,ceteris