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Show that the consumer is better off with a lump-sum tax rather than a proportional tax on wage income given that either tax yields the same revenue...

Show that the consumer is better off with a lump-sum tax rather than a proportional tax on wage income given that either tax yields the same revenue for the government. You must use a daigram to show this. (Hint: The consumption bundle the consumer chooses under the proportional tax must be just affordable given the lump-sum tax.)

This question was asked on May 09, 2010.

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