Which of the following is true about tax rates and economic growth?
A) Marginal tax rates that take a large share of income will enhance the incentive of individuals to invest and engage in productive activities.
B) High tax rates will tend to drive investment funds and highly productive citizens to other countries where tax rates are lower.
C) As marginal tax rates increase, individuals get to keep a larger share of their earnings.
D) Countries can gain by imposing higher tariffs and other barriers that will restrain international trade.

Question

Quizplus · Accepted Answer

High tax rates can discourage investment and productive activity by reducing the potential return on investment. This can lead highly productive citizens and investment funds to move to other countries where tax rates are lower, leading to a reduction in economic growth.

Which of the Following Is True About Tax Rates and Economic