What is a tax wedge, and how does it affect individual and corporate income?

• A. A tax wedge is the difference between pretax and post-tax income, increasing disposable income for individuals.
• B. A tax wedge is the difference between pretax and post-tax income, reducing disposable income for individuals and profits for corporations.
• C. A tax wedge is the difference between government spending and revenue, increasing disposable income for individuals.
• D. A tax wedge is the difference between corporate profits and individual income, having no impact on disposable income.

Answer: (B)