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Question
A government proposal to increase marginal tax rates on the wealthiest 2 percent of U.S. residents is supposed to generate an additional $100 billion in tax revenues. It is likely that
A) the actual revenue raised will exceed the $100 billion, because the other 98 percent of the population will increase their work effort with a more fair tax system.
B) the actual revenue raised will be more than $100 billion, because the short -run aggregate supply curve is upward sloping.
C) the actual revenue raised will be less than $100 billion, because some of the people will respond by working less and earning less income that can be taxed.
D) the actual revenue raised will be close to $100 billion, because the wealthy donʹt respond to work incentives the way poorer workers do.
Answer
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