A likely effect of this change in tax policy is that consumers in the state will choose to buy fewer things. The reduction in the value-added tax on consumer goods generally encourages consumption, but since the corporate tax increase does not affect consumers directly, there may be concerns about how the overall tax structure might influence businesses and prices. However, given that there is no net effect on the state budget, it is less likely to have immediate drastic negative effects on consumer behavior. The other options about high-income people leaving the state or financial institutions being less likely to invest are more speculative and not as directly linked to the changes outlined in the passage.
5 of 55 of 5 Items
Feature
A new administration reforms a state’s tax code. Corporate tax was increased by 3%, allowing the value-added tax on consumer goods to be reduced by 5%. This had no net effect on the state budget as the two tax changes balanced each other out.
Question
Use the passage to answer the question.
What is a likely effect of this change in tax policy?
(1 point)
Responses
High-income people will choose to leave the state.
High-income people will choose to leave the state.
Nonprofits will become a larger part of the economy.
Nonprofits will become a larger part of the economy.
Consumers in the state will choose to buy fewer things.
Consumers in the state will choose to buy fewer things.
Financial institutions will be less likely to invest in the state’s companies.
1 answer
1 answer