Chapter 38. Taxes: How High Is Too High?

38.1

According to Arthur Laffer, increased tax rates:

Tend to increase tax revenue.

Tend to decrease hours worked.

Tend to increase the tax base.

Tend to decrease tax incidence.

In the video, the top marginal tax rate was currently ____; this rate was _____ in 1980.

35%, 90%

35%; 70%

65%, 70%

65%, 90%

David Cay Johnston believes that higher tax rates lead workers to _____ because ____.

Work less; they do not wish to maintain their after-tax income.

Work less; they choose leisure over labor.

Work more; they wish to maintain their after-tax income.

Work more; they choose labor over leisure.

Peter Diamond states that the optimal top marginal tax rate should be ____; this value should be lower for ____.

22 percent; higher-income “job creators.”

22 percent; lower-income taxpayers.

49 percent; lower-income taxpayers.

49 percent; higher-income “job creators.”

According to Arthur Laffer, the actual tax rate should be located _____ the point where tax revenues are maximized.

At a lower rate

At a slightly higher rate than

At a much higher rate

Exactly at