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An employee's take-home wage is $2,000. The direct labor tax rate is 25%. If the government increases the direct labor tax rate to 30%, what must happen to the gross wage paid by the employer for the employee's take-home wage to remain unchanged at $2,000?
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Definition of Direct Tax Rate on Labor ()
Calculating Gross Wage from Take-Home Pay
An employee's take-home wage is $2,000. The direct labor tax rate is 25%. If the government increases the direct labor tax rate to 30%, what must happen to the gross wage paid by the employer for the employee's take-home wage to remain unchanged at $2,000?
Deriving Take-Home Wage from Gross Wage
True or False: To maintain a constant take-home wage for an employee, a doubling of the direct labor tax rate requires the employer to double the gross wage they pay.