What is the tax wedge, and how does it affect income?

The tax wedge is the difference between pretax and post-tax income, reducing disposable income for individuals and profits for corporations.

The tax wedge is the difference between corporate profits and individual income, having no impact on disposable income.

The tax wedge is the difference between pretax and post-tax income, increasing disposable income for individuals.

The tax wedge is the difference between government spending and revenue, increasing disposable income for individuals.