Incentives to work and save are reduced when
A)income taxes are higher.
B)consumption taxes replace income taxes.
C)corrective taxes are implemented.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Increasing income taxes reduces the amount of income a person will keep after taxes, decreasing the incentive to work. Additionally, if taxes on savings, such as capital gains taxes, are also increased, there is less incentive to save because the return on investment is lower. Therefore, higher income taxes reduce both the incentive to work and the incentive to save.

Incentives to Work and Save Are Reduced When