An economy with nominal tax rates significantly higher than effective tax rates has

Question

Quizplus · Accepted Answer

If the nominal tax rates are higher than the effective tax rates, it means that there are loopholes in the tax code that allow taxpayers to lower their tax burden. This could be due to tax deductions, exemptions, or credits that reduce the amount of taxable income. Therefore, option A is the correct answer. A regressive tax system would have a higher tax burden on lower-income individuals, while a progressive tax system would have higher tax rates for higher-income individuals. However, the question does not provide enough information to determine if the tax system is regressive or progressive.

An Economy with Nominal Tax Rates Significantly Higher Than Effective