Consider an economy containing two people ranked in order of their incomes; that is, their incomes are I1 < I2. Define an index of tax progressivity for this economy as V = (T1/I1 T0/I0) (a slight simplification of the measure discussed in class). (a) Explain how you would define the term more progressive in relation to this definition of V. (That is, tax code A is more progressive than tax code B if a) VA > VB; or b) VA < VB.) (b) Now suppose I1 = $10, 000 and I2 = $1, 000, 000. Initially the poor person pays T1 = $10 in taxes while the rich person pays T2 = $100, 000. Is this a progressive tax system why? (c) Now suppose there is a tax cut, after which poor person now pays T1 = $0 in taxes, while the rich person pays T2 = $90, 000. Is the system still progressive? (d) If both before tax cut and after tax cut is progressive, which one is more progressive? Before tax cut system as in (b) or after tax cut system as in (c) ? In light of this point, discuss the claim made by Greg Mankiw that the Bush tax cuts have been progressive because the proportion of total income taxes paid by high-income taxpayers has actually risen in recent years. Is Greg Mankiws statement in alignment with your conclusion based on V statistic?