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Suppose the U.S. Congress passes a bill which raises federal income tax rates for all workers. Following the tax increase, everyone continues to work the
Suppose the U.S. Congress passes a bill which raises federal income tax rates for all workers. Following the tax increase, everyone continues to work the same number of hours as before. The legislators who supported the bill conclude that since there was no labor supply response to the tax increase, the bill did not cause any additional deadweight loss. Is this conclusion justified?
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