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

Question

5. Redistributive philosophies and incentives

Consider a society comprised of two people. Kevin earns an income of $85,000 per year and Maria earns an income of $25,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Kevin's income and give the revenue to Maria.

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With the redistribution plan, Kevin will take home an income of. $............

The $18,750 that Kevin pays in taxes will be transferred by the government to Maria. Let us assume that since Maria 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, Maria's total income (including the government received) is now.$...............

Without a redistribution plan, total income in this society is $............. After the redistribution plan is implemented, total income in this society is $............ Therefore, the redistribution plan ................(decreases/increases) total income in this society.

According to the libertarian political philosophy, the government ( should/should not)  implement this redistribution plan. Why?

1.The plan benefits Maria, who is the least well off member of society.

2.Total societal utility will increase if the plan is enacted.

3. The government is not entitled to take money away from one person and give it to another.

Explanation / Answer

1. With the redistribution plan, Kevin will take home an income of $(75000-18750) = $ 56250.

2. With the redistribution plan, Maria's total income is now $ (24000+18750) = $ 42750

3. Without a redistribution plan, total income in this society is $ (85000 + 25000) = $ 110000.

After the redistribution plan is implemented, total income in this society is $ (56250 + 42750) = $ 99000.

Therefore, the redistribution plan decreases total income in this society.

4. According to the libertarian political philosophy, the government should not implement this redistribution plan.

The correct answer is: 3)

Thanks!

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