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Macroeconomy Question

Forums › ACCA Forums › ACCA BT Business and Technology Forums › Macroeconomy Question

  • This topic has 5 replies, 6 voices, and was last updated 14 years ago by mrjonbain.
Viewing 5 posts - 1 through 5 (of 5 total)
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  • June 16, 2010 at 9:24 am #44700
    ivenny
    Member
    • Topics: 1
    • Replies: 5
    • ☆

    Why high rates of personal income tax will lead to a reduction in the supply of labour?

    June 24, 2010 at 1:05 pm #64549
    rajad2010
    Member
    • Topics: 6
    • Replies: 52
    • ☆☆

    My take would be that a rise or very high rates of income tax will create dissatisfaction amongst the employment pool. This could cause reluctance in sharing a big chunk of income with the government etc. An example will be, if someone earning 38,000 pa, and the next threshold is 40,000 for a further higher band of tax, is offered opportunity to work overtime might decline to do so as the tax deductions might be substantial.

    Any other views?

    October 11, 2010 at 3:07 am #64551
    bridmw
    Member
    • Topics: 4
    • Replies: 130
    • ☆☆

    Because the incentive to work is reduced.

    June 23, 2011 at 8:51 am #64552
    Vipin
    Member
    • Topics: 151
    • Replies: 365
    • ☆☆☆☆

    the labour will then seek employment or prefer to work elsewhere where tax is low.
    Some prefer to be remain in their position and have family time than a high positon and high tax and high work load. this would lead reduce labour supply

    July 16, 2011 at 1:14 pm #64553
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2503
    • ☆☆☆☆☆

    Arguably, in some cicumstances, an increase in taxation will not lead to a decrease in the supply of labour and could actually increase the supply of labour as a result of something economists call the income effect.This process basically involves individuals seeking to maintain a target level of income by working more hours ,if available, in response to falling per hour real incomes.

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