# Suppose that a nation decides to introduce a new income tax system with the tax brackets shown in the table.Income rangeTax rate\$0-\$20,0000%\$20,001–\$39,00031%42%\$39,001-\$70,000\$70,001+50%Use the table to calculate the average tax rate and marginal tax rate for each of the families. Where applicable, round youranswer to the nearest whole number. Lee familyIncome = \$123,000Average tax rate:60Marginal tax rate:50

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Step 1

Under progressive tax system higher income people pay higher taxes. Average tax rate is used to calculate how much tax is paid overall.

Average tax paid by Lee family = [(39,000 - 20,000)*0.31 + (70,000 - 39,000)*0.42

+ (123,000 - 70,000)*0.50 ]/ 123,000

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