The clip below explains the income and substitution effect using the backward bending individuals supply curve. Although it looks at individuals it can be used to discuss the relative merits and issues of income tax policy.
For example, a government might increase the standard rate of income tax (which would be seen as a disincentive to work, but actually it increases the supply of labour as workers feel they need to work longer to maintain their current lifestyle. (the income effect now outweighs the substitution effect)
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