From: "Fred Foldvary" <[EMAIL PROTECTED]> > The question under debate is whether there is neutral taxation. > If the star plays for a team that pays him $1 million, and the government > taxes $800,000 of that, he will continue to play, so the tax did not alter > his incentives; the tax is neutral.
You must mean that the government taxes him at $899,999 (if you are to tax all the "rent" away). But that makes the player indifferent between playing for the team that values him at $1,000,000 and the one that values him at $ 100,001, and therfore there is no certainty that the resource (player) will be allocated to its most valued use.
