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Incentive to work and earn income

The incentive to work and earn income is likely to be least powerful if an individual who faces. (w) low income tax rates. making the cost of leisure high, and who possesses important amounts of valuable human capital. (x) high effective income tax rates, and who accepts only low transfer income if not working. (y) low income tax rates. raising the cost of leisure, and who gets only low transfer income while not working. (z) high effective income tax rates and is either paid high levels of transfer income when not working or inherits considerable wealth by thrifty and industrious parents.

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