The Tax Cuts and Jobs (TCJ) Act of December 2017 introduced the largest reform to the U.S. taxcode in more than three decades. One of the most significant changes involved the introduction andrefinement of wage income taxes with standard deductions for low-income workers. This change can beintroduced into the representative consumer's problem by considering a tax rate of t = 0 for the firstI units of real wage income, followed by a proportional tax t on each unit of real wage income greaterthan r. Therefore, the consumer's optimization problem can be re-expressed as follows:Max U(C,1)subject toJw(h - 1) + a, ifw(h – 1) 0I. Determine the effects of the introduction of the deduction on tax payıments. In particular(a) Graph the consumer's budget constraint.(b) Determine the optimization point for the case of a person who does not pay any taxes. Graph.(c) Determine the optimization point for the case of a person who pays taxes. Graph.

Consumption- leisure model shows the optimal bundle of the consumer subject to its budget…

1. Determine the effects of the introduction of the deduction on tax payıments. In particular (a) Graph the consumer's budget constraint. (b) Determine the optimization point for the case of a person who does not pay any taxes. Graph. (c) Determine the optimization point for the case of a person who pays taxes. Graph.

1. Determine the effects of the introduction of the deduction on tax payıments. In particular (a) Graph the consumer's budget constraint. (b) Determine the optimization point for the case of a person who does not pay any taxes. Graph. (c) Determine the optimization point for the case of a person who pays taxes. Graph.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.10P

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