Which of the following is true with regard to a tax on labor income? Taxes on labor income tend to encourage ?
Correct answer: C. all the things described in these answers.
- A. the unscrupulous to enter the underground economy
- B. the elderly to retire early.
- C. all the things described in these answers.
- D. second earners to stay home.
- E. workers to work fewer hoursEconomics
Explanation
Taxes on labor income reduce the reward from working and can encourage fewer working hours, early retirement, non-participation by second earners, and underground work. Therefore, all the listed effects are possible.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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