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Consider two tax systems. Tax system A has a tax rate of 5% on the first $20,000 of taxable income, then 20% on the next
Consider two tax systems. Tax system A has a tax rate of 5% on the first $20,000 of taxable income, then 20% on the next $30,000, then 50% on all taxable income above $50,000. Tax system A has a standard deduction of $5,000. Tax system B has a flat tax rate of 30% on all taxable income and a standard deduction of $10,000. Consider 2 individuals, the first with income of $51,000 and the second with income of $56,000.
- Calculate the average and the marginal tax rates of both individuals under both tax systems.
- For the income range of the two individuals is tax system A progressive?
- For the income range of the two individuals is tax system B more or less progressive than tax system A?
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