A ________ tax policy is one that has no impact on private decision-making, while a ________ policy is designed to encourage specific behavior.
A) flat; tax incentive
B) neutral; flat tax
C) neutral; tax incentive
D) none of the above

Question

Quizplus · Accepted Answer

A neutral tax policy is one that does not influence private decision-making and treats all activities equally. A tax incentive policy, on the other hand, is designed to encourage or discourage particular activities through tax breaks or penalties, respectively. The flat tax policy is not relevant here as it refers to a particular rate of taxation applied across all income levels. Therefore, option C is the best choice.

A ________ Tax Policy Is One That Has No Impact