In an effort to cut taxes paid for lower-income individuals, the government decides to increase the size of the bottom tax bracket from $15,000 to $25,000. Draw the new annual budget constraint.
1. (42 points) In his influential work on the impact of taxes on labor supply, Jerry Hausman assumed desired (or optimal) annual hours followed this formula: . Assume a two-bracket tax on annual earned income: the first $15,000 of earnings are taxed at a 10% marginal rate, with earnings above $15,000 taxed at a 30% […]