Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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? %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions