Question

The creators of Cards Against Humanity are undertaking a project to prevent the creation of a wall along the U.S./Mexico border. This project will involve hiring some talented lawyers with experience related to issues of eminent domain. These lawyers will be paid for their work, and their wages will be subject to a variety of taxes. A. How does the issue of standing impact whether or not these taxes should be included as part of the cost of the project? B. How does the prevailing unemployment rate among eminent domain lawyers impact whether or not these taxes should be included as part of the cost of the project? C. In your opinion and in light of your answers to parts A and B, should the taxes paid on the labor of these lawyers be included in the cost of the project? Explain why or why not.

Answer 1

A. If taxes are incliuded in the total cost it will lead to fall in the wage rate and thus will lower the cost. However, the revenue gained from taxes goes to the government and not to the firm. Thus, inclusion from standing point of view is not necessary.

b. If the unemployment rate among the lawyers is high they will accept lower wages and if unemployment rate is high higher wages will be given to the lawyers. If the taxes are incliuded as a part of the total cost in case of higher wages , then total cost will increase further. Thus, onlu in case of high unemployment rate these taxes should be included.

c.No, the taxes paid on the labor of these lawyers should not be included in the cost of the project as this is not the direct cost . Only the wages paid to labor form a part of the total cost and not the taxes paid by them.