I have a 5000-individual dataset and their incomes vary from 0 to 5000. For each band of income, following tax-rates are applicable:
If income$ >4000, t=0.6$
If $3000<$ income $<4000, t=0.5$
If $2000<$ income $<3000, t=0.4$
If $1000<$ income $<2000, t=0.3$
For all income $< 1000, t=0$
The mean of total tax collected is added to after-tax income (i.e $\text{income}-(\text{income}\times\text{tax rate})$) for every individual and this process is iterated over several periods.
-Can a general equation be formulated to predict the number of iterations required till all incomes are equal?
-Can a STATA code be written to run a simulation for this process?
Thanks!