Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose the government has been taxing each person's income at a marginal rate of .49 for every dollar in excess of $50,000 with the first
Suppose the government has been taxing each person's income at a marginal rate of .49 for every dollar in excess of $50,000 with the first $50,000 earned not taxed. In addition, the government imposes a lump- sum tax of $5,000 on every person who earns $100,000 or more. Write out and graph income after tax, y, as a function of income before tax, x. Indicate why the function has a point of discontinuity at x = $100,000. Discuss any incentive effects on hours worked that may arise due to this discontinuity in the tax schedule. (5 marks) Suppose the government has been taxing each person's income at a marginal rate of .49 for every dollar in excess of $50,000 with the first $50,000 earned not taxed. In addition, the government imposes a lump- sum tax of $5,000 on every person who earns $100,000 or more. Write out and graph income after tax, y, as a function of income before tax, x. Indicate why the function has a point of discontinuity at x = $100,000. Discuss any incentive effects on hours worked that may arise due to this discontinuity in the tax schedule
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started