Question: Li Na and Shirley both live two periods Both have
Li- Na and Shirley both live two periods. Both have earnings of 1,000 in the present and zero in the future. The interest rate is 8 percent. Suppose that they are each subject to an income tax, and Li- Na’s first period consumption is 200 while Shirley’s is 300. Who has the higher lifetime tax burden? Under a proportional consumption tax, how would their lifetime tax burdens compare?
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