When the minimum marginal penalty for tax evasion is greater than the maximum marginal tax rate,theory suggests that tax evasion will be
A) greater than 1.
B) ∞.
C) 0.
D) 100.

Question

Quizplus · Accepted Answer

When the minimum marginal penalty for tax evasion is greater than the maximum marginal tax rate, taxpayers will perceive that the expected cost of evading taxes is greater than the expected benefits. This creates a disincentive for taxpayers to engage in tax evasion, causing the level of tax evasion to approach zero.

When the Minimum Marginal Penalty for Tax Evasion Is Greater