June 05, 2003

Tax Cuts

We compared the effects of marginal tax rate cuts and lump sum tax rebates under the Keynesian and Classical views.

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At a given wage rate, we expect a cut in the income tax rate to increase labor supply.

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The effect of a lump sum rebate is not as clear. It could increase or decrease the labor supply at a given wage rate.

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Posted by bparke at June 5, 2003 01:23 PM