7. Labor Income Taxes (12 points) One of the key problems in designing optimal income tax schedules is the incentive compatibility constraint. Sijbren and Rozemarijn have wage rates ws 15 and wR = 25, respectively, reflecting their different skill levels. They have the same utility function given by U(c) = 10c; - (45), where c denotes individual consumption and y, refers to individual labor income (with i = S for Sijbren and i R for Rozemarijn). Sijbren earns ys = 1,500 euros per month, Rozemarijn yr 2.000 euros. The government considers introducing an income tax schedule that would tax employees with monthly earnings above 1,500 euros at an average tax rate of 20%. Everyone with y