Although tax revenue eventually begins to fall as tax rates increase,the revenue will always be greater than zero,no matter how large the tax is.

Question

Quizplus · Accepted Answer

This statement is false. As tax rates increase beyond a certain point, the disincentive effect on taxpayers can lead to a decrease in taxable activity, which can offset the gains from higher tax rates. This means that tax revenue may eventually decrease even though tax rates continue to rise. In extreme cases, excessively high tax rates may even lead to tax avoidance and other illegal activities, further reducing tax revenue.

Although Tax Revenue Eventually Begins to Fall as Tax Rates