Which is a potential negative impact of higher taxes on workers and their employers?

• A. Financial hardship for workers and employers
• B. Higher wages for workers
• C. Lower cost of living
• D. Decreased inflation

Answer: (A)

Higher taxes cut into what workers take home and raise costs for employers, creating financial pressure for both sides. When take-home pay shrinks, workers have less money for essential expenses, which is a clear hardship. For employers, higher taxes mean higher payroll or operating costs, which can squeeze profits, reduce hiring, or lead to price increases to cover the extra expense. Those effects directly describe a negative impact.

Higher wages for workers sounds beneficial, but it’s not a consequence of higher taxes in a straightforward way. A lower cost of living is opposite to what higher taxes tend to do, since taxes can raise the overall price of goods and reduce purchasing power. Decreased inflation isn’t an automatic or guaranteed result of higher taxes and is not the immediate negative impact described.