High Tax Rates and Summer Employment. Suppose you were considering taking a summer job to earn additional spending money for school. The job pays $12 an hour but you have to pay both income and social...

High Tax Rates and Summer Employment. Suppose you were considering taking a summer job to earn additional spending money for school. The job pays $12 an hour but you have to pay both income and social insurance taxes on your earnings. If you faced a 50 percent rate of taxation on your earnings (so you could keep only $6), would you keep working? How about a 70 percent rate? (Related to Application 2 on page 242.)