Question

High marginal tax rates will a. increase the incentive of people to earn. b. make it expensive for taxpayers to purchase tax deductible items. c. cause some people to work and earn less than would be the case if marginal tax rates were lower. d. attract workers from other countries where tax rates are lower.

Answer 1

Answer:

The correct answer is option c.

Explanation:

High marginal tax rates mean that people will have to pay higher taxes. This may lead to a situation where people are working but are able to earn less than what they could have earned if the tax rates would be the case if marginal tax rates were lower.  

This happens because a major part of the income has to be paid as taxes when the marginal tax rates are high.