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What is the correlation between a tax rate of zero and a tax rate of 100% government?

User Clueless User
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Answer:

The correlation between a tax rate of zero percent, and a tax rate of 100% is that in both cases the government would collect exactly zero taxes.

Step-by-step explanation:

The reason for this at the 0% rate is self-explanatory: if the government does not impose any taxes, it will obviously collect zero tax revenue.

However, the explanation for this case at the 100% is a bit more elaborate. At a 100% tax rate, incentives to work and earn income would radically change. In other words, people would have no incentive to do so because the government would charge a tax for 100% of their income. For this reason, they would either abandon employment, or find ways to avoid the tax. This would eventually result in zero tax revenue for the government.

User Akshay Khale
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