Discuss the possible effects this will have on labor supply

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Question: Suppose there is no grant or refundable tax credit at all; instead, there is a progressive income system with the following labor income tax brackets: • Earned income up to $20,000: τ 0 = 0 • Earned income from $20,000 and above τ 1 = .60 That is, income up to $20,000 is exempted from the income tax. Depict the effect this will have on the worker's budget constraint. 10 points. (g) Discuss the possible effects this will have on labor supply.

Reference no: EM133574098

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