This exercise presents an example of Simpson's paradox. The total income and total taxes paid in each
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Question:
This exercise presents an example of Simpson's paradox. The total income and total taxes paid in each of five income categories are given for two years, 1974 and 1978, in the following table.
1974 | 1978 | |||
Adjusted Gross Income | Income | Tax | Income | Tax |
Under $5,000 | 49,651,640 | 2,644,460 | 21,879,620 | 719,310 |
$5,000 to $9,999 | 146,400,740 | 13,646,348 | 122,853,315 | 8,819,461 |
$10,000 to $14,999 | 192,688,922 | 21,449,597 | 171,858,024 | 17,155,758 |
$15,000 to $99,999 | 470,010,790 | 75,038,230 | 865,037,814 | 137,860,951 |
$100,000 or more | 29,427,152 | 11,311,672 | 62,806,159 | 24,051,698 |
Total | 888,179,244 | 124,090,307 | 1,244,434,932 | 188,607,178 |
(a) The "tax rate" for any income category is calculated as Tax divided by Income. Calculate the tax rates for each income bracket in each year. (Round the answers to three decimal places.)
Adjusted Gross Income | 1974 | 1978 |
Under $5,000 | 1 | 2 |
$5,000 to $9,999 | 3 | 4 |
$10,000 to $14,999 | 5 | 6 |
$15,000 to $99,999 | 7 | 8 |
$100,000 or more | 9 | 10 |
(b) Calculate the overall tax rate for each of the two years. (Round the answers to three decimal places.)
For 1974, the rate is 11 ?
For 1978, the rate is 12?
Related Book For
Statistics Principles and Methods
ISBN: 978-0470904114
7th edition
Authors: Richard A. Johnson, Gouri K. Bhattacharyya
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