6 Policy application . Suppose that you as an economist are asked to evaluate a proposed state tax provision to exempt the fi rst $20,000 of retirement income for anyone over age 65 from the state income tax. The estimated revenue loss from this provision is $85 million in the fi rst year. In the future, the revenue loss will rise only with the growth in the elderly population since the $20,000 exemption is not indexed for infl ation. Evaluate this proposal in terms of equity, effi ciency, and other criteria set forth in Chapters 11 and 12 .