1. Chuck, a single taxpayer, earns $86,000 in taxable income and $20,000 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a. If Chuck earns an additional $53,000 of taxable income, what is his marginal tax rate on this income?

b. What is his marginal rate if, instead, he had $53,000 of additional deductions?

2. Hugh has the choice between investing in a City of Heflin bond at 5.10 percent or a Surething bond at 8.05 percent. Assume that both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate. What interest rate does Surething Inc., need to offer to make Hugh indifferent between investing in the two bonds? (Round your answer to 2 decimal places.)

3. Given the following tax structure,

Taxpayer	Salary		Total Tax
Mae	$	10,000	$	600
Pedro	$	20,000	$	1,500
Venita	$	10,000		???

What tax would need to be assessed on Venita to make the tax horizontally equitable?

4. Congress would like to increase tax revenues by 10.5 percent. Assume that the average taxpayer in the United States earns $61,000 and pays an average tax rate of 20 percent.

a. If the income effect is in effect for all taxpayers, what average tax rate will result in a 10.5 percent increase in tax revenues? (Round your answer to 2 decimal places.)