Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin

Exercise 6

Piketty proposes higher income and wealth taxes on the wealthy. Given that one's wealth generally depends primarily on how much output one produces, how do these taxes affect the incentives of people who are the most productive? Assume that the proceeds from the taxes are given out to the poor. How does this affect their incentives? Overall, what do you predict will happen to the total income and wealth of society as a result of higher taxes such as these?