The State of Aksarben has a problem. The State Supreme Court has just ruled that the states
Question:
The State of Aksarben has a problem. The State Supreme Court has just ruled that the state’s method of taxing property is unconstitutional. Rather than suffer the revenue shortfall that would occur in the absence of legislative action, Senator Wahoo reacts by introducing legislation which would provide a new tax surcharge to be applied to capital used in the agricultural sector, while leaving capital taxation unchanged in the rest of the economy. Set up a diagram like Figure 12.10 in which you can analyze the effect of an increase in the rate of taxation on capital in the agricultural sector and explain the effects of the tax increase.
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