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Suppose taxpayers are required to pay a base tax of $50 plus 30 percent on any income over $100, as in the initial tax system
Suppose taxpayers are required to pay a base tax of $50 plus 30 percent on any income over $100, as in the initial tax system B in the table below. Suppose further that the taxing authority wishes to raise by $40 the taxes of people with incomes of $200.
Tax System B | |||||
Initial Tax Schedule | Tax on Income of $200 | Tax rate | Disposable Income | ||
Average | Marginal | ||||
$50 + 30% of income over $100 | $80 | 40% | 30% | $120 |
(a) If marginal tax rates are to remain unchanged, what will the new base tax have to be? Instructions: Enter your response as a whole number. $ (b) If the base tax of $50 is to remain unchanged, what will the marginal tax rate have to be? %
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