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In 1986 Congress Drastically Cut the Marginal Tax Rate on Upper

Question 34

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In 1986 Congress drastically cut the marginal tax rate on upper income levels from 50% to 28%.Empirical evidence analyzing the labor supply effects of the tax cut found that women in the high income tax bracket


A) did not respond in any significant way to the tax cut, as their high level of income ensured that they were already content with their labor supply choices.
B) experienced offsetting substitution and income effects.
C) increased both labor force participation and hours of work significantly.
D) reduced their labor force participation and hours worked significantly because of a dominant income effect.

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