A 2 percent tax is going to be applied to a $100,000 tax base. What can be said about the revenue collected assuming dynamic tax analysis?

Question

Quizplus · Accepted Answer

Dynamic tax analysis takes into account the behavioral changes of taxpayers in response to the tax. It is likely that some taxpayers will alter their behavior in order to avoid the tax, such as reducing their taxable income or finding ways to evade the tax. Therefore, it is unlikely that the total revenue collected will be exactly $2,000, as assumed under static tax analysis. However, it is also unlikely that the revenue will be zero, as some taxpayers will still pay the tax. Therefore, the total revenue collected will likely be between $0 and $2,000.

A 2 Percent Tax Is Going to Be Applied to a $100,000