ECONOMICS (CBSE/UGC NET)

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ECONOMICS

ECONOMIC GROWTH

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
In 1979 in the UK the marginal rate of income tax imposed on the highest earners was 83% which increased to 98% if income was received from interest or dividends. By 1989 the highest marginal rate was reduced to 40%. Despite this reduction, the tax revenue raised from the highest earners increased substantially. Which theoretical concept illustrates this relationship between tax rates and tax revenue?
A
Laffer curve
B
Lorenz curve
C
Marshall condition
D
Keynesian AD/AS curve
Explanation: 

Detailed explanation-1: -The Government of Margaret Thatcher, who favoured taxation on consumption, reduced personal income tax rates during the 1980s in favour of indirect taxation. In the first budget after her election victory in 1979, the top rate was reduced from 83% to 60% and the basic rate from 33% to 30%.

Detailed explanation-2: -11Charge of income tax for 1970-71 (1)Income tax for the year 1970-71 shall be charged at the standard rate of 41-25 per cent, and, in the case of an individual whose total income exceeds £2, 500, at such higher rates in respect of the excess over £2, 000 as Parliament may hereafter determine.

Detailed explanation-3: -Personal Income Tax Rate in the United Kingdom averaged 42.42 percent from 1990 until 2022, reaching an all time high of 50.00 percent in 2010 and a record low of 40.00 percent in 1991.

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