If marginal tax rates decrease, the:

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Quizplus · Accepted Answer

When marginal tax rates decrease, it can reduce the incentive for tax avoidance and increase the incentive to work, save, and invest. This can lead to a reduction in the deadweight loss from taxes, as there may be less distortion of economic activity. However, the magnitude of the effect depends on various factors, such as the elasticity of labor supply and the size of the tax cut. Therefore, it may not be a complete elimination of deadweight loss, but it would be reduced.

If Marginal Tax Rates Decrease, The