Attempts Average / 4 10 . Redistributive philosophies and Incentives Consider a society consisting of two people. Musashi earns an income of $120,000 per year and Rina earns an income of $35,000 per year. The government is considering a redistribution plan that would impose a 20% tax on Musashi's income and give the revenue to Rina. Without any incentive distortion, Musashi would retain $96,000 and Rina would end up with $59,000. However, let us assume that since Musashi will not receive all the income he earns, he decides to work less and earn an income of only $110,000, of which 20% x $110,000 = $22,000 will be owed In taxes. With the redistribution plan, Musashi will take home an income of $ The $22,000 that Musashi pays in taxes will be transferred by the government to Rina. Let us assume that since Rina now receives payment from the government, she will not work as many hours and will earn an indene from work of only $34,000 instead of her initial $35,000. With the redistribution plan, Rina's total income (including the government payment received) is now $ Without a redistribution plan, total income in this society is $ After the redistribution plan is implemented, total income in this society is S . Therefore, the redistribution plan total income in this sodety. According to the utilitarian political philosophy, the $22,000 transferred from Musashi to Rina will benefit Rina _ than it hurts Musashi. Which of the following statements is true according to this philosophy? The redistribution may or may not be desirable, depending on the relative magnitude of the utility gain and the efficiency loss. The government should not Institute the plan because it has no right to take money from one person and give it to another. The government should definitely institute the plan because it will increase overall utility