Final answer:
Wren's taxable income for 2017 and 2018 would depend on when the contract is completed, income level, the progressive tax brackets, and tax policies influencing the labor supply and after-tax real wage, which in turn affect decisions regarding work and leisure.
Step-by-step explanation:
The effects on Wren's taxable income for 2017 and 2018 for a completed contract would largely depend on the particular circumstances of the income, the tax regime in place during those years, and Wren's decisions about work and income reporting. The completed contract method of accounting allows a taxpayer to report income and expenses from a contract in the year the contract is completed. If Wren's project is completed in 2017, then the total income and associated expenses will be reported on the 2017 tax return.
Considering different scenarios, if the tax brackets are progressive, Wren might be taxed more heavily as his income increases. However, the actual effect of the Reagan tax cuts or any other tax policies, like those by President George W. Bush, could reduce the overall tax rate, potentially encouraging Wren to increase his labor supply. The after-tax real wage, as explained in the given information, would be a critical factor influencing Wren's decisions related to labor supply, due to the interplay between work and leisure, as well as consumption and saving. In sum, the taxable income effects are nuanced and would need to be examined in the context of the specific details of Wren's earnings, the timing of the contract completion, and the prevailing tax policies during 2017 and 2018.