Amy and Shirley both live two periods. Both have earnings of $1,000 in the present and zero

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Amy 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 Amy’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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Public Finance In Canada

ISBN: 9781259030772

5th Canadian Edition

Authors: Harvey S. Rosen, Ted Gayer, Jean-Francois Wen, Tracy Snoddon

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