QUESTION 303. Referring to Fig 2d and the attached table, determine whether average federal individual income tax payments of the top 10%, top 5%, top 1% of households by income, has increased or decreased in the recession years of 1980-81, 1990-91, and 2001 (as compared to immediately prior year). Increased decreased Fig 2d. Avg pre-tax income & Avg federal tax payments by income class; Tax changes & RecessionsSources: NBER, Tax Found., CBO. (Avg federal tax payments = avg. pre-tax income - avg after-tax income)recession years2000600Imajor tax cuts1800Itax increases5001600-avg. pretax income ofTop 1%--avg. pretax income ofTop 5%1400400-avg. pretax income ofTop 10%1200-avg. pretax income ofHighest Quintile1000300-avg. pretax income ofAll Quintiles-Avg. federal taxes paidby Top 1%800Avg. federal taxes paidby Top 5%200600Avg. federal taxes paidby Top 10%Avg. federal taxes paidby Highest Quintile400100-Avg. federal taxes paidby All Quintiles20019791980198119821983198419851986 198719881989 1990 1991199219931994 19951996 19971998 1999 2000 2001 2002 2003 2004 2005 2006 2007recession years2000 2000 | 20002000 200020002000major tax cuts2000 2000 20002000 20002000 2000tax increases20002000avg. pretax income of Top 1%550.0 518.5 514.9 537.1 588.0 647.3 695.1 904.8 731.4 921.1 857.2 822.6 741.5 840.9 807.9 833.0 918.1 1012.6 1161.2 1304.3 1419.6 1551.3 1227.8 1087.6|1160.7| 1380.0|1660.4 1790.8 1873.0avg. pretax income5%248.8 236.9 232.7 238.0 250.6 274.7 285.9 344.3 305.2 346.6 338.2 324.5 304.7 330.3 323.8 334.3 358.7 384.4 423.7 461.9 492.3 522.4 444.3 406.9 430.4 485.8 555.5 582.4 611.2182.8 176.7 174.5 176.1 184.4 199.7 206.4 238.6 220.0 241.6 239.0 230.5 220.1 233.0 231.4 237.6 249.8 267.0 287.5 308.5 328.4 344.4 303.1 283.7 295.9 327.0 362.0 377.7 394.5avg. pretax income of Top 10%avg. pretax income of Highest Quintile140.3 135.7 134.7 134.7 139.2 148.9 152.9 172.5 162.5 174.8 173.9 168.8 162.9 170.1 170.2 173.6 181.8 190.9 202.3 214.7 227.5 236.5 213.9 203.3 210.1 227.8 246.7 256.0 264.7avg. pretax income of All Quintiles63.4 61.3 | 61.1 60.9 | 61.364.0 65.6| 70.4 68.0 71.0 71.6 70.8 69.0 | 70.8 | 71.1| 72.0 74.7 77.2 80.3 84.2 87.8 89.2 | 84.2 | 80.6 81.8 86.3 90.5 93.3 96.0Avg. federal taxes paid by Top 1%203.4 179.3 163.8 148.5 163.2 182.8 187.7 230.7 228.2 273.4 247.5 236.6 221.4 257.2 278.5 297.9 331.7 364.5 405.5 436.1 475.8 512.6 403.3 357.1 367.8 433.1 524.5 559.9 553.3Avg. federal taxes paid by Top 5%79.2 72.9 68.4 62.0 64.171.6 72.6 84.8 87.0 96.2 91.9 | 87.7 84.2 92.8 98.7 104.8 114.1 123.1 134.0 142.3 153.4 161.8 133.2 120.2 122.8 139.4 162.3 169.5 170.7Avg. federal taxes paid by Top 10%54.151.349.2 | 44,5 45,750.4 51.1| 57.959.964.562.7 60,358.4 62.666.2 69.8 74.5 80.385.9 90,4 97.5101.8 86.3 79.179.5 88.6 99.9 104.2 105.2Avg. federal taxes paid by Highest Quintile 38.6 37.0 | 36.2 | 32.8 33.236.1 36.7 41.041.944.843.9 42.4 41.343.545.6 47.5 50.653.5 56.6 59.3 63.766.2 | 57.1 52.952.4 57.563.5 66.1| 66.4Avg. federal taxes paid by All Quintiles14.113.613.712.612.513.4 13.7 14.7 14.715.515.4 15.2 14.815.215.716.0 16.8 17.618.4 19.0 20.120.518.0 16.716.217.318.619.3 19.6avg. pre-tax income in thousands of $avg. tax payments in thousands of $

Question

QUESTION 303. Referring to Fig 2d and the attached table, determine whether average federal individual income tax payments of the top 10%, top 5%, top 1% of households by income, has increased or decreased in the recession years of 1980-81, 1990-91, and 2001 (as compared to immediately prior year).  Increased  decreased Fig 2d. Avg pre-tax income & Avg federal tax payments by income class; Tax changes & RecessionsSources: NBER, Tax Found., CBO. (Avg federal tax payments = avg. pre-tax income - avg after-tax income)recession years2000600Imajor tax cuts1800Itax increases5001600-avg. pretax income ofTop 1%--avg. pretax income ofTop 5%1400400-avg. pretax income ofTop 10%1200-avg. pretax income ofHighest Quintile1000300-avg. pretax income ofAll Quintiles-Avg. federal taxes paidby Top 1%800Avg. federal taxes paidby Top 5%200600Avg. federal taxes paidby Top 10%Avg. federal taxes paidby Highest Quintile400100-Avg. federal taxes paidby All Quintiles20019791980198119821983198419851986 198719881989 1990 1991199219931994 19951996 19971998 1999 2000 2001 2002 2003 2004 2005 2006 2007recession years2000 2000 | 20002000 200020002000major tax cuts2000 2000 20002000 20002000 2000tax increases20002000avg. pretax income of Top 1%550.0 518.5 514.9 537.1 588.0 647.3 695.1 904.8 731.4 921.1 857.2 822.6 741.5 840.9 807.9 833.0 918.1 1012.6 1161.2 1304.3 1419.6 1551.3 1227.8 1087.6|1160.7| 1380.0|1660.4 1790.8 1873.0avg. pretax income5%248.8 236.9 232.7 238.0 250.6 274.7 285.9 344.3 305.2 346.6 338.2 324.5 304.7 330.3 323.8 334.3 358.7 384.4 423.7 461.9 492.3 522.4 444.3 406.9 430.4 485.8 555.5 582.4 611.2182.8 176.7 174.5 176.1 184.4 199.7 206.4 238.6 220.0 241.6 239.0 230.5 220.1 233.0 231.4 237.6 249.8 267.0 287.5 308.5 328.4 344.4 303.1 283.7 295.9 327.0 362.0 377.7 394.5avg. pretax income of Top 10%avg. pretax income of Highest Quintile140.3 135.7 134.7 134.7 139.2 148.9 152.9 172.5 162.5 174.8 173.9 168.8 162.9 170.1 170.2 173.6 181.8 190.9 202.3 214.7 227.5 236.5 213.9 203.3 210.1 227.8 246.7 256.0 264.7avg. pretax income of All Quintiles63.4 61.3 | 61.1 60.9 | 61.364.0 65.6| 70.4 68.0 71.0 71.6 70.8 69.0 | 70.8 | 71.1| 72.0 74.7 77.2 80.3 84.2 87.8 89.2 | 84.2 | 80.6 81.8 86.3 90.5 93.3 96.0Avg. federal taxes paid by Top 1%203.4 179.3 163.8 148.5 163.2 182.8 187.7 230.7 228.2 273.4 247.5 236.6 221.4 257.2 278.5 297.9 331.7 364.5 405.5 436.1 475.8 512.6 403.3 357.1 367.8 433.1 524.5 559.9 553.3Avg. federal taxes paid by Top 5%79.2 72.9 68.4 62.0 64.171.6 72.6 84.8 87.0 96.2 91.9 | 87.7 84.2 92.8 98.7 104.8 114.1 123.1 134.0 142.3 153.4 161.8 133.2 120.2 122.8 139.4 162.3 169.5 170.7Avg. federal taxes paid by Top 10%54.151.349.2 | 44,5 45,750.4 51.1| 57.959.964.562.7 60,358.4 62.666.2 69.8 74.5 80.385.9 90,4 97.5101.8 86.3 79.179.5 88.6 99.9 104.2 105.2Avg. federal taxes paid by Highest Quintile 38.6 37.0 | 36.2 | 32.8 33.236.1 36.7 41.041.944.843.9 42.4 41.343.545.6 47.5 50.653.5 56.6 59.3 63.766.2 | 57.1 52.952.4 57.563.5 66.1| 66.4Avg. federal taxes paid by All Quintiles14.113.613.712.612.513.4 13.7 14.7 14.715.515.4 15.2 14.815.215.716.0 16.8 17.618.4 19.0 20.120.518.0 16.716.217.318.619.3 19.6avg. pre-tax income in thousands of $avg. tax payments in thousands of $

Accepted Answer

A recession is the economic condition which brings contraction in the economic activities through…