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3. Suppose f(y) = Ay + By describes the income tax paid by a person earning y (dollars) of taxable income in a given year
3. Suppose f(y) = Ay + By describes the income tax paid by a person earning y (dollars) of taxable income in a given year (A and B are positive parameters). The government decides to reduce taxes and there are two proposals for doing so described below: (1) Allow every individual to deduct d dollars from their taxable income before the tax is calculated. (2) Calculate income tax on the full amount of taxable income, and then allow each person a "tax credit" that deducts c dollars from their total tax due. a) Write a function for each of the two proposals. (Hint: Start with f (y) and incorporate deductions appropriately.) ( 1 ) b) Caculate y* where the two proposals yield the same tax revenue. (Hint: Set your two new function equal to eachother and solve for y.) c) Illustrate graphically the two proposals and mark the income y*. moo en gnyallat el sthW . 31 4 DV (PA Tax (T) T =f()) Income ()) Page 3/9
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