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The Effects of Income Tax on Labour Supply For most people, income tax is viewed as a negative incentive to labour. While earned income tax 0 are viewed as positive labour stimuli. The level or amount of income taxes levied on individuals affects labour in three main ways. They affect the individuals’ participation in the labour force. That is, based on the income tax amount, an individual decides whether or not to work. The second effect relates to how much an individual works, i.e. the number of hours they perform per week (Cancian & Levinson 3). The third effect of income tax relates to how much money individuals save.
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