Business, 14.02.2020 04:47 emileep13

Suppose Congress is considering raising the top federal marginal tax rate from 35% to 40%. Senator Jones believes the elasticity of taxable income is large. Senator Smith believes the elasticity of taxable income is small. (Both believe the elasticity is positive.) The Congressional Budget Office estimates the effects of the tax proposal using each Senator's assumptions. (i) Will the estimates of additional revenue from the tax increase be larger or smaller under Senator Jones's assumptions, compared to Senator Smith's assumptions? (ii) What about estimates of the efficiency costs of the tax increase: which set of assumptions leads to the higher estimate?

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Suppose Congress is considering raising the top federal marginal tax rate from 35% to 40%. Senator J...

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