Question

Policymakers focus on marginal tax rates changes when making changes in the tax code because the marginal tax rate:_____

a. always equals the average tax rate which is harder to measure.
b. determines how much revenue the government will have to spend.
c. determines how tax revenue will change as national income increases.
d. affects people's willingness to work save, and invest.

Answer 1

d. affects people's willingness to work save, and invest.

Step-by-step explanation:

Marginal tax rate by definition is the rate of tax charged when an individual makes an additional dollar of income. If workers are charged higher tax rates , they are more likely to work less, to not look for higher paying jobs or not work at all than if they faced lower rates. A lower tax rate may be a good idea for policymakers but it could eliminate assistance given to poor families and individuals. Therefore each option has a tradeoff.