Both high-income and low-income employees are covered by

Reference no: EM13569991

Both high-income and low-income employees are covered by cafeteria plans. Under such plans, all employees may select from a list of nontaxable fringe benefits or they may elect to receive cash in lieu of these benefits.

a) Which group of employees is more likely to choose nontaxable fringe benefits in lieu of cash? Explain.

b) Is this result desirable from a social or economic point of view? Explain.

Reference no: EM13569991

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