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Policy will cause taxable income to decrease

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Reference no: EM132389381

Suppose that we increase the income tax rate. Consider the following statements:

I. If the elasticity of taxable income is positive, then the policy will cause taxable income to decrease

II. If the elasticity of taxable income is positive, then the policy will cause tax revenue to decrease.

Which of these statements do we know will be true?

Reference no: EM132389381

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