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The US has an absurdly complicated tax and transfer system, but economists sometimes use the following setup as an excellent approximation. Consider a household
The US has an absurdly complicated tax and transfer system, but economists sometimes use the following setup as an excellent approximation. Consider a household earning pre-tax income y>0. The taxes paid by the household are given by the nonlinear function T(y) = y-oy- where >0 and 1 are parameters. 1. Can T(y)
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