1. You have 1,000 households. The average income per household in your country is $25,000 and you need to raise about $8,000,000 in taxes to pay for roads, hospitals, national defense, airports, etc. How do you tax your population? Note that if household income drops below $10,000 families will have an incentive to stop working and collect welfare instead which reduces the number of households that can pay taxes! Households Income Total Gross National Required Tax Tax Per Income Revenue Household? Tax Rate Household income after tax Total Tax 1,000 $25,000 $25,000,000 $8,000,000 0% $25,000 $0 this number should = $8,000,000 2. Same facts as above, but new information reveals that the 100 lowest paid households average two adults and two children and income of about $12,000 per year. Households Income 100 900 $12,000 $26,444 Total Gross National Required Tax Tax Per Income Revenue $1,200,000 $23,800,000 $25,000,000 $ 8,000,000 Household? Tax Rate Household income after tax Total Tax 0% 0% $12,000 $26,444 $0