A static forecast of the incremental revenue from a tax rate increase presumes that:
A) The tax base will not change because of the rate increase.
B) The tax base will increase by the same proportion as the rate increase.
C) The tax base will decrease by the same proportion as the rate increase.
D) The tax rate and the tax base are correlated.

Question

Quizplus · Accepted Answer

A static forecast assumes that there will be no change in the tax base due to the tax rate increase. It assumes that all other factors influencing the tax base will remain constant. Therefore, the incremental revenue generated by the tax rate increase will solely be due to the change in the tax rate.

A Static Forecast of the Incremental Revenue from a Tax