In 2008, Britain decided to cut its value added tax VAT) to 15 percent from 17.5 percent. The VAT is similar to a sales tax. According to the supply-side view, this change will increase
i. the after-tax wage
ii. the incentive to work
iii. the supply of labor

Question

Quizplus · Accepted Answer

The supply-side view suggests that reducing taxes increases disposable income (after-tax wage), which enhances the incentive to work and can lead to an increase in the supply of labor.

In 2008, Britain Decided to Cut Its Value Added Tax