In response to growing concern about a ‘wage gap’ between skilled and unskilled workers, candidate Hiram Bloviate has offered two alternative
In response to growing concern about a ‘wage gap’ between skilled and unskilled workers, candidate Hiram Bloviate has offered two alternative proposals designed to close the wage gap by making low wage workers more attractive to employers. • The first is to remove the cap on the amount of worker wages subject to the employer paid portion of the Social Security tax (the current cap is around $100,000), as well as eliminating the deductibility of capital expenditures (that is, employers can no longer reduce their business income tax liability by purchasing capital). • The second is to exempt the first $50,000 of employee wages from the employer paid Social Security tax. A. What will be the effects of the two proposals? Analyze them separately, using the appropriate course concepts. B. Which proposal is more likely to achieve Candidate Bloviate’s objective? Why?
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