LESON23B

LESON23B - Econ 275 - Public Finance - Winter 1994 -...

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Econ 275 - Public Finance - Winter 1994 - 3/29/94 - Lesson #23 - leson23b.275-- Page -- Admin: Look at leson21a.275-leson23a.275 Ch 13- Income taxation Comprehensive Income - Haig-Simons Definition measurement problems Other examples: get students to think about other analogous untaxed activities Household production: value of spouses work at home. laundry, dishes, child-care, handy work. Returns on other assets. Cars, durable goods. Subtract off for depreciation. Quick review of income and substitution effects Taxation on labor, income and substitution effects. Draw graph. Leisure on horizontal, Income (consumption) on vertical. Wage rate, w, ($10 per hours). Now impose a tax of 10 percent. Before the equation of the line : I = 10*(24-l). With the tax I = 10*(24-l) - .1*(10*24-l). Flatter slope. What are the effects? Leisure has become relatively less expensive. consumer more. This is the substitution effect.
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LESON23B - Econ 275 - Public Finance - Winter 1994 -...

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