Proportional tax must be just affordable under lump-sum tax

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Show that the consumer is better off with a lump-sum tax rather than a proportional tax on wage income given that either tax yields the same revenue for the government. You must use a diagram to show this. (Hint: the consumption bundle the consumer chooses under the proportional tax must be just affordable under the lump-sum tax.)

Reference no: EM13736827

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