Problem #2-Tax schedule

1. Suppose the tax schedule is T = - 3000 + 0.3Y, where T is the amount of tax paid when the taxpayers income is Y.

(i) What is the marginal tax rate of this schedule? (Marginal tax rate is the additional amount of tax when income increases by one dollar.)

(ii) How much the person pays if her income is $50,000? What is her average tax rate? (Average Tax rate is the total amount of tax divided by his income.)

(iii) How much the person pays if her income is $100,000? What is her average tax rate?

(iv) If her income increases from $100,000 to $101,000, how much more tax does she pay?

(v) Choose one: This tax schedule is (progressive proportional regressive)

Justify your answer.

(vi) The rate structure of federal income tax is given as

Taxable income marginal tax rate

$0 - $20,000 15%

$20,000 $52,000 28%

$52,000 and above 31%

Calculate the tax liability of a taxpayer whose income is $60,000.