In the 1944, in the United States, the lowest marginal tax rate for single filer was 23% for incomes between $0 and $2,000. In 2022 the lowest marginal tax rate for single filer was 10% for incomes between $0 and $11,000. In 1944, the marginal tax rate in the highest income bracket was

94% for incomes over $200,000 and in 2022 the highest marginal tax rate was 37% for incomes over $578,126. In In 1944 there were 32 tax brackets and in 2022 there were 7 tax brackets. The tax brackets in both 1944 and

2022 demonstrated an increase in the marginal tax rate as incomes increased. [Incomes displayed are not adjusted for inflation].

Part 1 :  what is the type of tax system that is described above where marginal tax rates increase as income increases?

Part 2 : Suppose that an individual earned income in the highest tax bracket in 2022. Does the individual pay 37% tax on all of her income earned? Explain your answer.

In the 1940s, when former President Ronald Reagan was an actor, he would only make two movies per year and observed "Why should I have done a third picture - even if it was Gone with the Wind? What good would it have done me?" Instead of making another picture, he would, as he described it, 'loaf around." Suppose that each movie paid $75.000

Part 3 : Considering the tax brackets for 1944 described above, why would former President Reagan choose to not make a third movie?

Part 4 : When former President Reagan decided to "loaf around" instead of working, did the income effect or substitution effect dominate his decision? Explain your answer. Be sure to note in your explanation whether you are considering pre-tax or after-tax earnings. [Hint: Be sure to consider the cost-benefit principle].