assignment 1 - Chien Chiu Hsiung Econ 20.1 Professor Sardy...

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Chien Chiu Hsiung Econ 20.1 Professor Sardy February 25, 2010 Assignment 1: Chapter 2AP2 Income Tax Rate (X-axis) Tax Revenue (Y-Axis) 0% 0 10% 100 20% 200 30% 300 40% 400 50% 500 60% 600 70% 700 80% 800 90% 700 100% 0 In this graph, we can see the x- axis or independent variable is the income tax rate and the y- axis or dependent variable is the tax revenue. According to Arthur Laffer, when the tax rates is at above a certain level, tax revenue would fall because high taxes would cause people not to work since they will get no income after paying heavy taxes. We can see in the graph and table that when the income tax rate is at 0%, the tax revenue would be at 0 because there won’t be any revenue. Also, at a 100% income tax rate, the tax revenue would be 0 as well because at this rate none of the taxpayers will earn any income so they are unwilling to work or find a way to avoid paying taxes. If US government decides to increase the tax rate to 100%, very few people will be working since the money they earn would not be going into their pocket and mostly likely the
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assignment 1 - Chien Chiu Hsiung Econ 20.1 Professor Sardy...

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