In October 2008, President Bush enacted the Alternative Minimum Tax Relief Act of 2008, which resulted in lower taxes on labor income. According the supply-side view, as a result of this act the incentive to work ____________and the tax wedge____________ .
A) increases; increases
B) decreases; increases
C) increases; decreases
D) increases; does not change

Question

Quizplus · Accepted Answer

The supply-side view suggests that lower taxes on labor income increase the incentive to work because individuals get to keep more of their earnings. Additionally, a reduction in taxes decreases the tax wedge, which is the difference between what employers pay and what employees receive.

In October 2008, President Bush Enacted the Alternative Minimum Tax