Question

Reductions in personal income tax rates that increase labor supply and work effort. True or False

Answer 1

Answer:

True

Explanation:

Supply side economist Arthur Laffer developed a theory to fully explain this which is known as the Laffer curve . It states :

If taxes are too high along the Laffer Curve, then they will discourage the taxed activities, such as work and

investment, enough to actually reduce total tax revenue. In this case, cutting

tax rates will both stimulate economic incentives and increase tax revenue.

From the theory a reduction in personal tax will prompt the zeal to work. Thereby attracting more people to work and more people to invest in the economy