On January​ 1, 2014, the top federal income tax bracket in the United States went from 35 percent to 39.6 percent. Many republicans claimed that lowering the rewards for working​ (the net​ after-tax wage​ rate) would lead to less work effort and a lower labor supply. Proponents of the tax increase replied that this claim was baseless because it​ "ignored the income effect of the tax increase​ (net wage​ decrease)." Explain what these critics meant.

Since some people will work less and some will work​ more, there will be no benefit from increasing the tax rate.



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