y - r (y - x)
B & equality at M
M = (B - r x) / (1 - r)
Malthus has subsistence B enforced by nature. Under current rules of (European) welfare states, B can be higher, since people who cannot earn subsistence B are entitled to a benefit of that level. [46] Table 3 gives the Dutch example.
Table 3: Tax wedge at subsistence (single person)
| Dutch legal minimum wage 2002 (per annum) | € |
| Gross minimum wage in the official statute | 15,638 |
| Net, after deduction of taxes incl. premiums for the employee (single person) | 12,516 |
| Gross minimum wage: gross + premiums for the employer | 18,265 |
| All taxes incl. premiums (though exclusive of VAT etc.) | 5,749 |
| Tax as a percentage of gross minimum wage | 31.5 % |
| Tax as a percentage of net income | 45.9 % |
The Dutch situation is depicted in Figure 7, the tax plot. The horizontal axis gives income y, the vertical axis the tax t. The tax line T[y] gives the Dutch tax brackets. Net income is given by the difference between the tax and the 45-degrees line (t = y). Subsistence causes the line y - B parallel to the 45-degrees line. This line cuts off a part of net income. The intersection of the subsistence and tax lines gives y - B = T[y], and this solves into the minimum wage y = M. You must earn at least M to satisfy the minimum net income requirement B.