If tax elasticity of supply is 0.8 and tax rates increase by 10 percent, the quantity of labor supplied would increase by 8 percent.
To calculate the increase in the quantity of labor supplied:
Percentage change in labor supplied = Tax elasticity of supply * Percentage change in the tax rates. By substituting the value, Percentage change in labor supplied = 0.8 * 10% ,Percentage change in labor supplied = 8% increase.
Tax elasticity considers the automatic response of revenues to the exchange in profits given that the tax structure is unchanged. then again, tax buoyancy displays both the effects of income and discretionary modifications on sales income.
while a tax is buoyant, its revenue will increase without growing the tax charge. A comparable-looking idea is tax elasticity. It refers to changes in tax sales in reaction to modifications in tax price
The resulting degree—the behavioral elasticity of tax sales (BETR)—captures the trade in overall assets on account of marginal modifications in tax rates, the tax base, or tax enforcement
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