Question

A dynamic forecast of the incremental revenue from a tax rate increase ______.

a. Presumes that taxpayers modify their behavior and the tax rate and tax base are correlated.
b. Presumes that the tax base will increase proportionate.
c. To increases in the tax rate is effective because economists can precisely quantify the effect.
d. Leaving little uncertainty regarding the outcome of a tax rate change

Answer 1

A dynamic forecast of the incremental revenue from a tax rate increase Presumes that taxpayers modify their behavior and the tax rate and tax base are correlated.

Explanation:

The dynamic forecasting uses the magnitude of the dependent variable for the measurement of the next expected value. From the other side, for each following prediction, static forecast uses the real value.

A dynamic forecast for such an increase in tax receipts presumes that:

A) taxpayers will not change their attitudes as a result of the increase in tax rates.

B) The tax base increases by as much as the increase in rates.

C) The base tax falls to the same degree as the increase rate.

D) The tax rate is associated with the tax base.