15. Suppose two people live in a society that has a 25% income tax. Both people...

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15. Suppose two people live in a society that has a 25% income tax. Both people have pre-tax income of $40,000. In period 1, there was no tax deduction, Lillian gave $6,000 to charity, and Susie gave $4,000 to charity. In period 2, the government makes charitable donations tax deductible, and Lillian gives $8,000. What amount must Susie give in period 2 so that the marginal impact of the tax break is equal to the inframarginal impact of the tax break? 15. Suppose two people live in a society that has a 25% income tax. Both people have pre-tax income of $40,000. In period 1, there was no tax deduction, Lillian gave $6,000 to charity, and Susie gave $4,000 to charity. In period 2, the government makes charitable donations tax deductible, and Lillian gives $8,000. What amount must Susie give in period 2 so that the marginal impact of the tax break is equal to the inframarginal impact of the tax break?

Answer rating: 100% (QA)

To calculate the marginal impact of the tax break we need to find out how much less tax Lillian pays ... View the full answer