Suppose that,as a result of an income tax rate increase,you pay more tax on the same amount of income.This is an example of which channel through which tax rate changes can change tax revenues?

Question

Quizplus · Accepted Answer

The direct effect channel is the most relevant in this scenario, as it refers to the impact of tax rate changes on tax revenues without considering changes in taxpayer behavior or economic activity. In this case, the increase in tax rate leads to a direct increase in the amount of tax paid on the same amount of income. The reporting effect refers to changes in taxpayer behavior due to changes in tax rates, while the income exclusion effect pertains to changes in the amount of income subject to taxation. The compliance effect relates to changes in taxpayer compliance and the likelihood of tax evasion.

Suppose That,as a Result of an Income Tax Rate Increase,you