How Do the High Implicit Marginal Tax Rates That Often

question 35

Multiple Choice

How do the high implicit marginal tax rates that often occur when transfer payments are inversely linked to earnings affect the incentive of poor people to work and earn?

• A) A poor person's incentive to earn is increased.
• B) A poor person's incentive to earn is reduced.
• C) The incentive of the poor to earn is unaffected.
• D) The incentive of the poor to earn reported income is increased, but the incentive to earn unreported income is reduced.

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