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Suppose Arizona establishes an income tax schedule that has a tax rate of 10% on the first $20,000 of income, then 25% on the next

  1. Suppose Arizona establishes an income tax schedule that has a tax rate of 10% on the first $20,000 of income, then 25% on the next $30,000, and then 40% on all taxable income above $50,000. Arizona provides a $4,000 exemption per family member.
    1. The Wilkening Family has three members (Tom, the sole earner and his two sons), and earns $54,000 per year. Calculate their marginal tax rate, average tax rate, and effective tax rate.
    2. The Didier Family has four members (Tatiana, the sole earner and her three daughters), and earns $74,000 per year. Calculate their marginal tax rate, average tax rate, and effective tax rate.

iii)Suppose that under Arizonas tax system, taxes are levied at the household level (i.e. the marginal tax rates apply to combined spousal income). Does this tax system provide Tom and Tatiana a financial incentive to marry each other or does it provide a disincentive?

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