Question

An estimate of the efficiency-loss ratio of taxes on labor income is 15 percent. The efficiency-loss ratio of taxes on capital income is estimated to be 45 percent.
Assuming that these estimates are accurate, calculate the change in well-being that would result from a $10 billion reduction in taxes on capital income, accompanied by a $10 billion increase in taxes on labor income.


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  • CreatedAugust 22, 2015
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