Which of the following factors will influence the size of the deadweight loss from the individual income tax?
(i) on average, people will choose to not work as hard as they would if income was not taxed
(ii) on average, people will choose to save less and consume more
(iii) on average, people will choose to reduce their leisure time
A)(i), (ii) and (iii)
B)(i) and (ii) only
C)(i) and (iii) only
D)(ii) and (iii) only

Question

Quizplus · Accepted Answer

Deadweight loss from the individual income tax is influenced by how taxes alter individuals' behavior towards work and savings. (i) indicates that people might work less due to the disincentive effect of taxes, increasing deadweight loss. (ii) suggests that people might save less, which can affect investment and economic growth, also contributing to deadweight loss. (iii) is incorrect because reducing leisure time implies people are working more, which would not typically contribute to deadweight loss from income tax; rather, it's the opposite effect.

Which of the Following Factors Will Influence the Size of the Deadweight