An example of tax smoothing is provided by evidence of
A)temporary changes in defense expenditures by the government.
B)reductions in tax rates prior to presidential elections.
C)Keynesian tax cuts designed to help the economy recover from a recession.
D)reliance on debt financing rather than taxation during World War II.

Question

Quizplus · Accepted Answer

Tax smoothing involves keeping taxation relatively stable over time to avoid large fluctuations that could have negative effects on the economy. During World War II, the United States relied heavily on debt financing rather than taxation to fund its war efforts. After the war, the government engaged in tax smoothing to gradually bring tax rates back up to pre-war levels, rather than implementing a sudden and drastic increase. This approach helped to avoid a shock to the economy and allowed for a smoother transition back to peacetime conditions.

An Example of Tax Smoothing Is Provided by Evidence of