That is, the after-tax interest rate on foreign bonds must exceed the growth rate of domestic aggregate output.
The final equation equates the after-tax marginal physical product of capital (and the corresponding real return on bonds) to the rate of return on consumption.
In this outcome, money is not held and the household consumes its after-tax endowment each period.
However, there is also a 'tax-interaction effect' due to the impact of different taxes on the after-tax wage.
Already retired agents benefit from this reform, as it reduces the contribution rate and, consequently, increases their after-tax pension.
If she consequently earns well below her potential, she will end up with a relatively low level of after-tax income.
Employees may contribute to a thrift-savings plan on an after-tax basis, but taxes on account earnings are deferred until the funds are withdrawn.
If a public school is chosen, all after-tax income is consumed and the child's education is fully government provided.