Tax credits, exemption, and exclusions all can be used by governments to reduce taxes. Consider a credit of $5,000, an exemption of $5,000, and an exclusion of $5,000all to be added to the existing federal individual income tax. Which of the following statements is correct?

The personal exemption would save the individual taxpayer the most money because it would have the greatest relative increase over existing exemption levels (currently approximately $2,000).
The credit will cause greater revenue loss to the government, because it takes effect after the application of the rate schedule and directly reduces tax liability.
The revenue lost by the U.S. Treasury would be greatest for the exclusion, because they are illegal.
All tax reducing impacts are the same.