High Tax Rates and Summer Employment. Suppose you are trying to decide whether to take a...

High Tax Rates and Summer Employment. Suppose you are trying to decide whether to take a summer job at Clark's Camera Store that pays $20 an hour, or work for your uncle as his graphic assistant for $16 an hour. At Clark's Camera Store you would have to pay both income and social insurance taxes on your earnings, but if you work for your uncle, he will pay you in cash so you can avoid the tax. You will prefer to work for your uncle if the income and social insurance tax rate ▼ is less than is more than nothing%. (Enter your response as an integer.)

Solutions

Expert Solution

You will prefer working for uncle when the income and social tax rate is more than or equal to 20% because you get $20 when you work for summer job at clark's camera store and $16 for uncle. So the gap is $4 which is 20% of the $20 and hence equal to or more than 20% will attract you to uncle.

Rahul Sunny answered 1 year ago

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