Since 2010,r the federal government and many,r provinces have increased the tax rate on top income earners. This question asks you to think about whether these policies were a good idea. In a 2015 paper titled "Taxation and Top Incomes in lElana ", Kevin Iinlligan and I'vchael Smart estimated that the elasticity of taxable income (ETI) for the top one percent of income earnings in Canada is E; = 0.51. {a} The income cutoff to be in the top one percent in Newfoundland is $103,004 (or $108.05! thousand dollars) and the average taxable income re- ported by individual tax lers in the top one percent is $233,220 (or 3203.220 thousand dollars}. In 2015, 4,120 individual tax lers were in the top one percent in Newfoundland. Suppose that the province is interested in in- creasing its top marginal rate from 1" to 1" + r, where r is a small positive number. What is the Mechanical e'ect of this tax reform {i.e. calculate M}? [3 marks] (b) The current top marginal tax rate in Newfoundland (federal + provincial) is 43.0%. Using the ETI estimate provided, what is the Behavioral effect of this tax reform (i.e. calculate B)? [2 marks]