Tax Revenue and Labor Supply. Tax revenue collected from a payroll tax equals the tax rate times the earnings of individuals subject to the payroll tax. Let’s say the labor-supply curve is close to...

Tax Revenue and Labor Supply. Tax revenue collected from a payroll tax equals the tax rate times the earnings of individuals subject to the payroll tax. Let’s say the labor-supply curve is close to vertical. Explain why, in this case, raising payroll tax rates will increase the total revenue the government receives from the payroll tax.