When the tax rates imposed on the rich are high, a reduction in these rates
A) will always lead to a reduction in the tax revenue collected from the rich.
B) will not affect the tax revenue collected from the rich.
C) will increase the reported incomes of the rich and it may also lead to an increase in tax revenue collected from them.
D) will decrease the reported incomes of the rich, and thereby reduce the tax revenue collected from them.

Question

Quizplus · Accepted Answer

When tax rates on the rich are high, they may have less incentive to report all their income and may also engage in tax planning strategies to reduce their taxable income. When tax rates are reduced, they have more incentive to report all their income and may engage in less tax planning, which can increase the amount of tax revenue collected from them. However, the extent to which tax revenue will increase depends on how responsive the rich are to changes in tax rates and whether the tax cuts stimulate economic growth.

When the Tax Rates Imposed on the Rich Are High