A Dynamic Forecast of the Incremental Revenue from a Tax

Multiple Choice

A dynamic forecast of the incremental revenue from a tax rate increase presumes that:

A) Taxpayers will not change their behavior because of the rate increase.
B) The tax base will increase by the same proportion as the rate increase.
C) The tax base will decrease by the same proportion as the rate increase.
D) The tax rate and the tax base are correlated.