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ps4 - BUEC 280 Assignment#4 Prof Simon Woodcock Spring 2007...

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BUEC 280: Assignment #4 Prof. Simon Woodcock Spring 2007 Due: Tuesday, March 13 in lecture Workers in the country of Newtopia currently pay no income taxes. However, a new government was recently elected, and they have decided to introduce a personal income tax to finance a large purchase of futiliguns. Futiliguns are completely useless: the people of Newtopia do not currently consume them, and they will get no utility from knowing the government owns many of them. Thus it is safe to assume that this policy change will not affect the prices of consumption goods in Newtopia, and that the only change in Newtopian workers’ utility will be the direct result of the income tax. Five different options for the income tax have been proposed. They are: 1. A flat tax . Under this tax, every worker would be required to pay a tax equal to 10% of their labour earnings. All of the tax revenue will be spent on futiliguns. 2. A flat tax with redistribution . Under this tax, each worker would be required to pay a tax equal to 20% of their labour earnings.
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