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[20 marks] Consider a flat tax system where the first $ > 0 of income is not taxable and any
income in excess of $ is taxed at a fixed marginal rate of > 0. Jane and James are married
with incomes and , where > > 0.
Suppose = .
(a) What is total tax liability of Jane and James if they tax jointly on their total income, + ?
(b) What is total tax liability of Jane and James if they tax separately on their income, and
What is total tax liability of Jane and James if they tax jointly on their total income, , and this
bigger or smaller than the tax liability in (a)
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