5.11 Several political leaders, including some recent candidates for the U.S. presidency, have proposed a flat income tax, where the marginal tax rate is constant.

a. Show that if each person is allowed a “personal deduction” where the first $10,000 is untaxed, the flat tax can be a progressive tax.

b. Proponents of the flat tax claim that it will stimulate production (relative to the current progressive income tax where marginal rates increase with income). Discuss the merits of their claim.