A senator wants to raise tax revenue and make the workers better off. A staff member...

A senator wants to raise tax revenue and make the workers better off. A staff member proposes raising the payroll tax paid by firms and using part of the extra revenue to reduce the payroll tax paid by workers. Would this accomplish the senator’s goal?

Expert Solution

It will not accomplish senator's goal because here labour is the good and wage is the price to be paid.the tax is paid by the firm and the workers will not change as the elasticity of demand and supply of labour decline due to decline in wages.tax is a wedge between what the firms pays and what workers receive so its very clear that it doesn't accomolish the senators goal

Rahul Sunny answered 2 years ago

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