Redistributive philosophies and incentives Consider a society consisting of two people. Dmitri earns an income of $115,000 per year and Frances earns an income of $30,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Dmitri's income and give the revenue to Frances Without any incentive distortion, Dmitri would retain $86,250 and Frances would end up with $58,750. However, let us assume that since Dmitri will not receive all the income he earns, he decides to work less and earn an income of only $105,000, of which 25% x $105,000-$26,250 will be owed In taxes. With the redistribution plan, Dmitri will take home an income of ___
The $26,250 that Dmitri pays in taxes will be transferred by the government to Frances. Let us assume that since Frances now receives payment from the government, she will not work as many hours and will earn an income from work of only $29,000 instead of her initial $30,000.
with the redistribution plan, Frances's total income (including the government payment received) is now ____
Without a redistribution plan, total inc ome in this society is ___.,after the redistribution plans implemented, total income in this society is ___therefore,he redistribution___ total income in this society. According to the utilitarian political philosophy, the $26,250 transferred from Dmitri to Frances will beneft Frances than it hurts Dmitt. Which of the following Matements is true according to this philosophy O The redistribution may or may not be desirable, depending on the relative magnitude of the utility gain and the efficiency loss OThe government should not institute the plan because it has no right to take money from one person and give it to another O The government should definitely institute the plan because it will increase overall utility. Grade It Now Save & Continue Continue without saving