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Question: Does income tax provide a disincentive to work effort?
Answer: Atkinson and Stiglitz say in their lectures on public economics, ‘although neither economic theory nor empirical evidence can provide a conclusive answer to the effect of income taxation on labour supply…the analysis can provide considerable insight’ (1980.) An income tax is taken from earned income and usually deducted from wages of employees by their employers. This type of tax is assessed and collected from the employee and is known as a direct tax. The economic theory of income tax requires us to look at the supply curve of labour.
There are some assumptions that need to be made:...(short extract)
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Details: Mark: 60% | Subject: Economics | Course: Economics | Level: A-Level | Year: Not applicable | Document type: Essay* | Words: 858 | References: Yes | Date written: Not available | Date submitted: March 31, 2009 | Essay ID: 1152
