The equation below forecasts personal income tax (PIT) using two explanatory variables, personal income (PI) in dollars and the personal income tax rate (R) in percentage points (e.g. if the tax rate is 4% then R=4).

Personal income is currently $1,000,000 and the tax rate is 4%. The Governor proposes reducing the tax rate to 3% and suggests that the impact of income growth during the next year will offset the revenue loss from the tax rate reduction. What will personal income have to be with a 3% tax rate to yield the same revenue that would result with personal income of $1,000,000 and a 4% tax rate?

A) $2,049,313

B) $3,050,789

C) $4,678,098

D) $1,567,980

E) None of the above.

F) All of the above.

PIT = 300 + 0.08PI + 83945R