Income taxes are taxes levied based on the income you earn. In the U.S., income taxes are progressive, which means that people with higher incomes pay a higher percentage of their income in taxes. Some lawmakers advocate a flat tax, in which every income earner pays the same percentage of income in taxes. A flat tax would significantly reduce the paperwork and rules and regulations associated with the income tax. However, changing the tax rules would cause much disruption in the economy as people changed their economic behavior in response to the change in the tax law.

a. True
b. False

Generally when tax rules are changed especially so drastically, people will indeed change their economic behavior in response and this will cause disruption in the economy.

In this scenario for instance, a flat tax would be more damaging to the rich that to the poor so a lot of the poor might lose their incentive to work knowing that so much of their earnings are being taken. They may also find ways to avoid paying taxes in general.