f92f - YORK UNIVERSITY Faculty of Graduate Studies Annual...

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YORK UNIVERSITY Faculty of Graduate Studies Annual Examination December 21, 1992 Economics 5300.03A : Public Economics – Taxation S. Bucovetsky time=2 hours Answer any five of the following eight questions. 1. Discuss the effect on labour supply of the following modification to the income tax : allow a tax credit of $1000 to the mother and father of each child under the age of 16, with the tax credit being reduced by $100 for each $1000 of income the parent has in excess of $10,000, so that no tax credit can be claimed by any parent whose annual income exceeds $20,000. 2. Discuss the effect on current savings of a permanent increase in the tax rate on all capital income ( with an offsetting deduction against taxes of all borrowing costs ), to a 25–year–old who has just entered the labour force. 3. Suppose an individual has a fixed amount W 0 of wealth to allocate between a safe and a risky asset for some fixed holding period, and the person’s utility from an end–of–holding–period wealth W is U ( W ) = b - e ( - aW ) where a and b are positive constants. The safe asset has a sure positive return
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