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We showed in class that if there is a person with the highest ability (and, hence, earnings), then the marginal tax rate for that person
We showed in class that if there is a person with the highest ability (and, hence, earnings), then the marginal tax rate for that person should be set to zero because of the incentive effect. What other consideration do we need to take into account if ability can be arbitrarily high or we are not going to adjust the tax rate just for the highest ability person?
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