A comprehensive income tax with few loopholes is efficient because labor
A)supply is very little affected by taxation.
B)demand is very little affected by taxation.
C)supply is highly responsive to taxation.
D)demand is highly responsive to taxation.

Question

Quizplus · Accepted Answer

A comprehensive income tax with few loopholes is efficient because labor supply is very little affected by taxation. This means that individuals will continue to work and supply their labor regardless of the tax rate, making the tax revenue more stable and predictable for the government. On the other hand, if labor supply was highly responsive to taxation (choice C), individuals may choose to work fewer hours or not work at all if their tax burden increases, leading to a decrease in tax revenue for the government. Additionally, if demand was highly responsive to taxation (choice D), businesses may choose to reduce their output or move their operations to countries with lower tax rates, leading to a decrease in employment opportunities and economic growth.

A Comprehensive Income Tax with Few Loopholes Is Efficient Because