Tag Archives: Keynesian Coordination Failure

Explain why a proportional tax on wages is distortionary, making individuals worse off than raising the equivalent tax revenue from a lump sum tax.

‘Lower wages incentivise the poor to work more hours, whereas higher wages incentivise the rich to work more hours.’ Analyse this assertion. Explain why a proportional tax on wages is distortionary, making individuals worse off than raising the equivalent tax revenue from a lump sum tax. How worried should we be about the rise in […]