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I have a piecewise linear function (spline) describing a progressive income tax schedule, with higher marginal rates kicking in for higher and higher incomes.

I want to understand the implications of a rule that some tax exempt income might still raise your average rate on the taxable part. Basically, with x being taxable income and y being exempt income, your taxes will be f(x+y)/(x+y)*x, where f is the nonlinear scheme that would apply to income without exemptions. I can define f as a piecewise linear function, see above.

To calculate marginal tax rates on taxable and exempt income, I’d simply need the partial derivates of this expression, with the particular function f plugged in, and this I can plot against the two variables. Or plot against one and use the other as a parameter for Manipulate.

The derivative looks OK in Mathematica, though it is a bit hard to check with so many cases.

However, I get empty plots, which of course are pointless to manipulate. Where does this go wrong?

Manipulate[Plot[D[Tax[x+y]/(x+y)*x,y],{y,0,200000}],{x,0,200000}]

Think of Tax this way:

Tax [z_]:= Piecewise[{
                        {0,0    <=z< 11265},
                        {0+ 0.0856(z-11265),11265<=z}
                    }]
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Use Evaluate in the first argument of Plot:

Manipulate[Plot[Evaluate@D[Tax[x + y]/(x + y)*x, y], {y, 0, 200000}],
   {x, 0, 200000}]

enter image description here

| improve this answer | |
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  • $\begingroup$ Does it work for you? I still get an empty plot, even if I move x around. $\endgroup$ – László Jul 2 '19 at 19:55
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    $\begingroup$ @László, it works in both version 12 (Wolfram Cloud) and version 9 (Windows 19). I posted a picture. (Perrhaps using ClearAll[Tax] before you define Tax may help to avoid possible previous assignments getting in the way). $\endgroup$ – kglr Jul 2 '19 at 20:07
  • $\begingroup$ Great, it did the trick, thanks! $\endgroup$ – László Jul 2 '19 at 20:24

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