Interest earnings from accumulated savings are subject to personal income tax in Canada.As a result,
A)total national saving is higher than it otherwise would be.
B)there will be more capital accumulated for the economy.
C)the interest paid on savings accounts increases.
D)individuals have a reduced incentive to save.
E)taxes applied to this income are regressive.

Question

Quizplus · Accepted Answer

When interest earnings from accumulated savings are subject to personal income tax, individuals have a reduced incentive to save, as they are not able to keep as much of the interest earned. This may lead to lower levels of national saving and accumulation of capital, as well as lower interest paid on savings accounts. Additionally, taxes applied to this income are not necessarily regressive, as the tax rate may vary based on the individual's income level.

Interest Earnings from Accumulated Savings Are Subject to Personal Income