Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 12, Problem 14CQ
To determine
The effects of increase in employment with similar wage rate of alternative sectors.
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Song earns $148,000 taxable income as an interior designer and is taxed at an average rate of 20 percent (i.e., $29,600 of tax). Answer the questions below assuming that Congress increases the income tax rate such that Song's average tax rate increases from 20 percent to 25 percent.
Required:
What will happen to the government's tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $111,000 in taxable income?
What is the term that describes this type of reaction to a tax rate increase?
What types of taxpayers are likely to respond in this manner?
Income Tax rates will be changed to the following Marginal Tax Rates given by: T(I) = 40*I2/ I2+1000
T is the tax rate given as a percentage
I is the income of the person in THOUSANDS of dollars
What is the marginal tax rate approaching as Income approaches infinity?
(round the nearest hundredth of a percent)
Will the economic recovery from COVID-19 be shaped like a V, or a U, or an L?
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Macroeconomics: Private and Public Choice (MindTap Course List)
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