![]() ![]() Measures of the magnitude of the investment and consumption changes vary, but the relationship between the variables is consistently negative: as tax levels or rates decrease, investment and/or consumption increases and vice versa. Changes in rates of private investment and private consumption are highly correlated with tax changes.A decrease in a tax system’s progressivity is associated with an increase in the real growth rate of wages.The likelihood of an employed head of household obtaining a better job within a year is higher when a tax system’s progressivity is reduced.The mobility of higher-skilled and higher income earners in an open economy works against the effort of progressive state and local tax systems to achieve long-term redistribution of income.Research almost invariably shows a negative relationship between income tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
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