   Chapter 11, Problem 7QP

Chapter
Section
Textbook Problem

Jim favors progressive taxation and equal after-tax pay for equal work. Comment.

To determine

Compare the progressive tax system and the ‘equal after-tax pay for equal work’.

Explanation

The concept of ‘equal pay for the equal work’ later extended to equal after-tax pay for equal work. That means, two individuals who do the same works should earn the same income after the tax deduction, although it is not possible in the presence of a progressive tax structure.

It is explained using the following example: Two individuals A and B where A earns $30,000 and B earns$40,000, and the tax rates are 20% and 30%, respectively.  Suppose each drives a car on Christmas night, and each earns \$500 for the night. The notable thing is according to the ‘equal after-tax pay for equal work’ concept, A and B has to receive equal pay...

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