Imagine the country is made up of 100 households. The federal government needs to collect $1,200,000 in income taxes to be able to function. The population consists of six (6) groups: - Group A: 20 households that eam $16,000 each - Group B: 20 households that earn $29,000 each - Group C: 19 households that earn $53,000 each - Group D: 20 households that earn $80,000 each - Group E: 16 households that earn $134,000 each - Group F: 5 households that earn $301,000 each This scenario is roughly proportional to the actual United States population and tax needs. We are going to determine new income tax rates. Flat Tax The first proposal well consider is a flat tax * one where every income group is taxed at the same percentage rate. What is the total income of our six groups (all 100 households)? \$ What flat tax rate would be necessary in order to collect $1,200,000 ? \%. (round to one decimal place) Modified Flat Tax The second proposal well consider is a modified flat-tax plan, where everyone only pays taxes on any income over $20,000, So everyone in group A will pay no taxes. Everyone in group B will pay taxes on 59,000 . Everyone in group C will only pay taxes on $33,000, etc. What is the total taxable income for the whole population? $ What flat tax rate would be necessary in order to collect $1,200,000 in this modified system? \% (round to one decimal place) Summary of Flat Tax Comnlate the followine table: Summary of Flat Tax Compl Progre The third proposal we'll consider is a progressive tax, where lower income groups are taxed at a lower percent rate, and higher income groups are taxed at a higher percent rate. For simplicity, we're going to assume that a household is taxed at the same rate on all of their income. The third proposal we'll consider is a progressive tax, where lower income groups are taxed at a lower percent rate, and higher income groups are taxed at a higher percent rate. For simplicity, we're going to assume that a household is taxed at the same rate on all of their income. Determine the tax rate necessary for group F to meet the country's financial need ($1,200,000). HINT Perform your calculations for total tax collected using the given rates for groups A - E. Then determine how much more tax you NEED to collect. Use that figure to determine the tax rate needed for group F. Does your total tax collected add up to $1,200,000 ? Discretionary income is the income people have left over after paying for necessities like rent, food, transportation, etc. The cost of basic expenses does increase with income, since housing and car costs are higher, however usually not proportionally. For each income group, an estimate of their essential expenses has been given. Compute the effective tax rate for each plan, relative to discretionary income (dividathatavinain huthaidierrationsonu inmanai (Round to one decimal place for all effective rates.) Which plan seems the most fair to you? Which plan seems the least fair to you? Why? Make sure to answer in complete sentences with full explanation. A quality answer should have a few sentences of explanation with mathematical reasoning
