Principles of Taxation

Attachments:

• graph

1. Individuals can vary the hours they work
2. All earnings are taxable
3. Each hour of work is equally productive
4. One wage rate exists
5. Demand for labour is perfectly elastic
6. Tax imposed is proportional income tax

1. individuals encouraged to work harder as they can afford less

1. individuals encouraged not to work extra as marginal costs outweigh the marginal benefits

1. difficult to predict tax as the two effects are opposite