The City of Philadelphia still heavily taxes income at the city-level (even though Philly residents also pay state and federal income taxes of course). One of the proposals around by one of the mayoral candidates is to lower the city tax rate. Opponents argue that this policy would make the city's fiscal deficit even worse. People in favor argue that an increase in deficits is not necessarily a consequence of lower tax rates.

(a) Which group is right? Explain. (7 points)

(b) What would be a benefit of lower taxes? (3 points)