Homework#1 - Chien Chiu Hsiung Economic 2100 February 15,...

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Chien Chiu Hsiung Economic 2100 February 15, 2011 Chapter 2: problem 12 a. This is a true statement "when people must pay higher taxes on their wage earnings, it reduces their incentive to work." When people have to pay higher federal or state taxes, it makes most people want to work less because less money is going into people's pocket after taxes for the time they worked for. Let say, the government tax 12% on people earning $1,000-$50,000 and 20% on people earning $50,000 and up. The table and the graph shows that from $30,000- $50,000 at the tax rate of 12%, it increases $600 for every $5,000 a person make. In contrast, people earning $50,000 or more at the tax rate of 20%, they see their tax increase by $1,000. This shows that if people or businesses want to make more than $50,000, they will have to pay higher taxes. As a result, it decreases people incentive to work and earn more than $50,000. People will work less to avoid 20% tax rate and less likely to spend. With less spending and producing, it will cause market to fail and that is a bad thing. Annual
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Homework#1 - Chien Chiu Hsiung Economic 2100 February 15,...

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