Aggregate labour hours, L, are given by L = 51*(1-t), where 't' is the rate of income tax. The real wage rate is fixed and equal to 1. At what tax rate is tax revenue maximised? State your answer to 2 decimal places.
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Aggregate labour hours, L, are given by L = 51*(1-t), where 't' is the rate of income tax. The real wage rate is fixed and equal to 1. At what tax rate is tax revenue maximised?
State your answer to 2 decimal places.
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Solved in 2 steps
- (a) Income tax affect the supply of labour and real wage rate of labour. Figure Q5 shows the effects of income tax on the number of labour supply and the real wage rate of labour. LD, is labour demand curve, LSo is labour supply curve before tax, and LS, is labour supply curve after tax. Real wage rate (RM per hour) 50 - LS1 40 LSo 30 20 LDo 10 200 210 220 Labour (billion of hours per year) Figure Q5 : Income tax in the labour market Determine the following based on the information given in figure Q5: (i) Equilibrium hours of labour supply and real wage rate per hour before tax. (ii) Equilibrium hours of labour supply and real wage rate per hour after tax. (iii) Real wage rate per hour paid by firm and real wage rate per hour received by workers. (iv) Amount of tax wedge between the wage rate that firms pay and workers receive after tax.A tax on labour income that does not eventually affect the number of labour hours supplied is non-distortionary. Do you agree or disagree with this statement. ExplainIn 2022 the US congress passed, and the US president signed the inflation reduction act. Besides other measures, the act also provides protection/subsides to US firms. Read below quotation from an article published on this topic. "To qualify for the act's tax credit of up to $7,500 on the purchase of an electric vehicle (EV), the vehicle's battery must be made of minerals and components mostly extracted and produced in America, or otherwise in a country with which the US has an explicit free trade agreement. This provision excludes the output of many countries, including those in Europe, which can mine and produce the needed minerals and components at lower costs than American companies can" "Naturally, the provision has angered many member nations of the European Union, with some warning of "tit for tat" retaliatory restrictions or subsidies to punish American industries. A joint task force comprising US and EU representatives met Dec. 5 to attempt to address this issue". Write a…
- The United States has established a progressive income tax system, where a worker’s tax rate onearnings increases as she earns more money. There are 168 hours in a given week. Assume thatfor the first 56 hours worked, the tax rate is t1, which means that the net real wage is w*(1-t1).After working the 56th hour, the worker jumps to a higher tax rate t2. After the 112th hourworked, the individual jumps to an even higher tax rate, t3.(a) During most election years, some politicians argue that a having a flat tax system isbetter. Assume that there is a proposal to institute a flat tax, where all workers pay a taxrate equal to t4, which is greater than t3. On the same set of axes, graph the budgetconstraints associated with the progressive tax system and the flat tax system. Make sureto label all of the slopes.(b) Would moving to this proposed flat tax system likely encourage more or fewer hoursworked for relatively high-wage workers? Make sure to explain your answer (a writtenexplanation…Labour Supply and Taxes 1. Let the (pre-tax) price level P equal 1. Let W denote the nominal wage rate and L denote the number of hours worked. Suppose the income tax rate is th. (a) Suppose that L equals 100. Calculate after-tax income (after-income tax income). (b) Suppose the sales tax rate (the tax rate on consumption) is denoted to . Suppose that, with the pre-sales tax P equal to 1, the price of goods equals (1+ c ). Calculate after-tax real (labour) income (this after-tax variable depends on both tax rates). Explain, in words, what this after-tax real income variable measures.The following table shows income tax rates in Econoland. Annual Income Up to $60,000 From $60,001 to $90,000 Over $90,000 This is an example of a Tax Rate 10% 20% 30% income tax. Nick, a resident of Econoland, currently works 20 hours a week and earns an annual income of $60,000. After paying income taxes, Nick receives per year. If Nick works an additional 10 hours a week (30 hours a week total), his annual income will be $90,000. After paying income taxes, Nick will receive per year. In other words, by working an additional 10 hours per week, Nick will receive an additional If Nick works 10 more hours in a week (40 hours a week total), his annual income will further increase to $120,000. After paying income taxes, Nick will receive per year. In other words, by working 10 more hours per week, Nick will receive more than what he would receive if he works only 30 hours a week. As Nick works more, the additional amount he receives from working 10 more hours " which means his cost of…
- 1.24 Read the following and answer question 1.24-1.25. ‘Exit tax’ to hit South Africans looking to emigrate from 2022When ceasing their South African tax residency, taxpayers are subject to an ‘exit tax’ which forms part of theemigration process.However, the National Treasury has proposed a further tax on those who intend to permanently leave SouthAfrican shores, say tax experts at specialist advisory firm Tax Consulting SA.“In the National Treasury’s latest published Draft Tax Bills, which incorporates the tax proposals made in the2021 budget, the amendment proposes to tax retirement fund interests of individuals when they cease SouthAfrican tax residency,” the firm said.Source: https://businesstech.co.za/news/wealth/512238/exit-tax-to-hit-south-africans-looking-to-emigrate-from2022/Accessed: 20/08/21If enforced, the above proposed “Exit tax” will impact which of the following national totals when South Africansmigrate as opposed to there being no exit tax?a) Gross domestic productb)…Carole works 35 hours a week at a wage rate of $20. Thus, her total weekly income is $700 On this income, she pays total taxes of $49.00 However, she calculates that on the last hour that she works, she pays $4.00 Carole's average tax rate is% (Round your response to two decimal places) Carole's marginal tax rate is% (Round your response to two decimal places) D(continued) An economist is surprised because he expected total income to fall when the wage rose. In other words he thought that the labor demand curve was very but it turned out to be more elastic, inelastic inelastic, elastic
- Consider an economy in which the marginal product of labor, MPN, is: MPN 500 -2N, where N is the amount of labor used. he amount of labor supplied, NS, is given by: NS = 18 + 10w + 3T, where w is the real wage, and Tis a lump-sum tax levied on individuals. Suppose that T= 41. The equilibrium value of employment is (round your answer to two decimal places). The equilibrium value of the real wage is (round your answer to two decimal places). Suppose in this situation, the government passes minimum-wage legislation that requires firms to pay a real wage greater than or equal to $10 Which of the following best explains the effect on the labor market? O A. The increase in the wage rate will cause the supply of labor to increase, and thus employment will increase. O B. The minimum wage is below the equilibrium wage, so there is no effect on the labor market. C. The wage rises to $10.88, the quantity of labor demanded increases, and employment increases. O D. The wage will rise to more than…The marginal product of labor (measured in units of output) for a certain firm is: MPN = A(100-N), where A measures productivity and N is the number of labor hours used in production. The price of output is $2 per unit. (Round all answers to two decimal places.) If A = 1 and the nominal wage is $80, the quantity of labor demanded will be 60 If A = 1 and the nominal wage is $100, the quantity of labor demanded will be 50 Assume that A is equal to 1. Using the line drawing tool, draw the labor demand curve from 0 to 100 units of labor. Properly label this line. Carefully follow the instructions above, and only draw the required objects. If A = 1, the price of output is $4, and the supply of labor is fixed at 85, the equilibrium real wage is 15, and the equilibrium nominal wage is $60. C Real Wage, W/P 220- 200- 180- 160- 140- 120- 100- 80- 60- 40- 20- 0 (10,0) 0 10 20 30 40 50 60 70 80 90 100 110 120 Labor, N ONFamily Flowers employs 17 people, of whom 14 earn gross pay of $640.00 each and 3 earn gross pay of $720.00 each on a weekly basis. What is the employer's share of total social security and Medicare taxes for the first quarter of the year? (Social security tax is 6.2% of wages up to $128,400. Medicare tax is 1.45% of all wages.)
