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Suppose two workers earn labor incomes of $20,000per year in each-(Answered)


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Suppose two workers earn labor incomes of $20,000per year in each of three tax accounting periods. Oneworker saves 20 percent of her labor earnings in eachof the first two periods and spends all her savings andaccumulated interest in the final period. The otherworker never saves any of her labor earnings. Themarket rate of interest is 10 percent.Calculate the discounted present value of taxespaid over the three periods for each of the workers undera 15 percent comprehensive income tax. Whatwould be the effect of substituting a comprehensiveconsumption tax for a comprehensive income tax?Comment on the equity and efficiency aspects of eachof the two taxes


Paper#9209537 | Written in 27-Jul-2016

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