4. Redistributive philosophies and incentives Consider a society comprised of tw

Question

4. Redistributive philosophies and incentives Consider a society comprised of two people. Larry earns an income of $85,000 per year and Megan earns an income of $25,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Larry's income and give the revenue to Megan. Without any incentive distortion, Larry would retain $63,750 and Megan would end up with $46,250. However, let us assume that since Larry will not receive all the income he earns, he decides to work less and earn an income of only $75,000, of which 25%× $75.000-$18,750 will be owed in taxes. With the redistribution plan, Larry will take home an income of$ The $18,750 that Larry pays in taxes will be transferred by the government to Megan. Let us assume that since Megan now receives payment from the government, she will not work as many hours and will earn an income from work of only $24,000 instead of her initial $25,000 With the redistribution plan, Megan's total income (including the government payment received) is now Without a redistribution plan, total income in this society is$ is $ After the redistribution plan is implemented, total income in this society Therefore, the redistribution plan total income in this society. According to the libertarian political philosophy, the government implement this redistribution plan. Why? O The government is not entitled to take money away from one person and give it to another O The plan benefits Megan, who is the least well off member of society. O Total societal utility will increase if the plan is enacted.

Explanation / Answer

The answers in order of the blanks are:

1. 56250 (75000-18750= 56250).

2.42750 ( 18750 + 24000).

3. 110,000 ( 85000 + 25000).

4. 99,000 ( 75000 + 24000).

5. Decreases.

6. Should not

7. The correct answer is: A).

Thanks!

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.