Final answer:
Economists favor constant tax rates because they provide stability and predictability, which are essential for economic planning by businesses and households, thus supporting sustained economic growth and efficient financial planning.
Step-by-step explanation:
Economists suggest that tax rates be kept roughly constant over time because constant tax rates provide stability and predictability for households and businesses. This constancy is critical as it influences economic behavior and planning. Businesses are more likely to invest and hire workers if they can predict future tax obligations, while households can better plan their savings and consumption. Alternating between high and low tax levels would create uncertainty, potentially hindering economic growth and leading to inefficient financial planning.
Marginal tax rates and average tax rates rise with income, and changes in these rates can significantly impact the distribution of income. While higher income households pay a larger fraction of their incomes as taxes, thus making the post-tax distribution of income more equitable, constantly changing tax rates would lead to confusion and unpredictable effects on consumption behavior. Therefore, predictable taxation is deemed favorable for the economic health of a country.