Income tax revenues rise as income tax rates fall.It follows that the

Question

Quizplus · Accepted Answer

The statement implies that lowering the income tax rates has led to an increase in the tax base, which means more people are now paying income tax. Therefore, the percentage increase in the tax base would be greater than the percentage cut in the tax rate to generate the same or higher income tax revenues. This is because a lower tax rate incentivizes more people to work, invest and spend, leading to an overall boost in economic activity and taxable income. Marginal tax rate and average tax rate are not relevant to this scenario.

Income Tax Revenues Rise as Income Tax Rates Fall