Attempts 18 12 Keep the Highest 184 4 Redistributive philoso

Attempts: 1.8 1.2 Keep the Highest: 1.8/4 4. Redistributive philosophies and incentives Consider a society comprised of two people. Jacques earns an income of $100,000 per year and Kyoko earns an income of $30,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Jacques\'s income and give the revenue to Kyoko. Without any incentive distortion, Jacques would retain $75,000 and Kyoko would end up with $55,000. However, let us assume that since Jacques will not receive all the income he earns, he decides to work less and earn an income of only S 85,000, of which 25% $85,000-$21.25 wil be owed in taxes. With the redistribution plan, Jacques will take home an income of$ The $21,250 that Jacques pays in taxes will be transferred by the government to Kyoko. Let us assume that since Kyoko now receives payment from the government, she will not work as many hours and will earn an income from work of only $26,000 instead of her initial $30,000 With the redistribution plan, Kyoko\'s total income (including the government payment received) is now$ Without a redistribution plan, total income in this society is$ After the redistribution plan is implemented, total income in this society is s . Therefore, the redistribution plan total income in this society. According to the libertarian political philosophy, the government implement this redistribution plan. Why? Total societal utility will increase if the plan is enacted. The government is not entitled to take money away from one person and give it to another. The plan benefits Kyoko, who is the least well off member of society.

Solution

With the redistribution, Jacques will take home an income of = $(85000 - 21250) = $63,750.

And, Kyoko\'s total income is now= $(26000+21250)

= $ 47,250.

Without the redistribution plan, total income in the society = $130,000 ( 100,000+ 30,000).

After redistribution, total income in the society = $111,000(63,750 + 47,250).Therefore, the redistribution plan reduces total income in the society.

=the government shouldn\'t implement this redistribution plan.

Answer to the MCQ = c)

Revert back in case of any doubts.

Thanks!