Tax Revenue and Economic Performance Analysis

An income tax is a tax on an economic input Taxes on outputs are less likely to distort economic behavior than taxes on inputs Input Labor о Labor and capital are inputs ⚫ The is one rationale behind consumption о taxes Taxing income may lead to inefficient outcomes о ⚫ Taxing income discourages work. Less labor leads to a decline in economic output 。 Income tax is a disincentive to save because income tax penalizes consumption and savings IIT: 6.4%-11.0% Output GET 4.0% Firms Goods Capital Capital gains 7.25% 2

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