EBK PRINCIPLES OF MACROECONOMICS
12th Edition
ISBN: 9780134079592
Author: Oster
Publisher: YUZU
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Chapter 15, Problem 1.2P
To determine
Effects of income tax on labor effort and labor supply.
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The FICA tax is levied on employers, employees, and certain self-employed individuals.
Revenue goes to Social Security and Medicare. In 2014, the employee's contribution to the
retirement part of the FICA tax was 6.2 percent of the first $117,000 earned in wages and
salaries. (Medicare is withheld on all wages and tips.) People with income from interest and
dividend
payments do not have to pay any Social Security tax on this income.
What is the tax structure for the income tax over the income range of $0 to $117,000?
O Proportional Tax
O Progressive Tax
Regressive Tax
Suppose in Fiscal illegal there is a 0 percent tax on the first 10,000 of income, but there is a 20% tax on earnings between $10,000 and $20,000 and a 30% tax on income $20,000 and $30,000. Any income above $30,000 is taxed at 40%.
If your income is $70,000, how much will you pay in taxes?
Determine your average tax rate?
Suppose you earned $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket which taxes at 10% ranges from zero dollars to $30,000. The second tax bracket which tax at 25% ranges from 30,001 to $120,000. How much will you pay in total taxes?
Chapter 15 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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- Suppose in Fiscalville there is no tax on the first $10,000 of income, but a 20 percent tax on earnings between $10,001 and $20,000 and a 30 percent tax on income between $20,001 and $30,000. Any income above $30,000 is taxed at 40 percent. If your income is $50,000, how much will you pay in taxes? Determine your marginal and average tax rates. Is this a progressive tax? Explain.arrow_forwardDiscuss the effects of indirect taxes on inflation and demand.arrow_forwardRay earns an income of $250,000 per year in Country X. Suppose for the year 2014 there is a proportional tax rate of 22%. Also suppose for the year 2015 that the country follows the federal income tax bracket, as shown below. What will be the change in the direction and the amount of income tax paid by Ray? Taxable income between $0 and $9,225 $9,226 and $37,450 $37,451 and $90,750 $90,751 and $189,300 $189,301 and $411,500 Federal income tax bracket 10 percent 15 percent 25 percent 28 percent 33 percent $411,501 and $413,200 35 percent There will be $413,201 and above 39.6 percent ▾ in the income tax paid by Ray in the year 2015 as compared to the year 2014 by $ (Round your answer to two decimal places.)arrow_forward
- Suppose in Fiscalville there is a 0 percent tax on the first $10,000 of income, but there is a 20 percent tax on earnings between $10,000 and $20,000 and a 30 percent tax on income between $20,000 and $30,000. Any income above $30,000 is taxed at 40 percent. Instructions: Round your answers to the nearest whole number. a. If your income is $70,000, how much will you pay in taxes? 2$ b. Determine your marginal tax rate. percent c. Determine your average tax rate. percent d. Is Fiscalville's income tax progressive? (Click to select) Varrow_forwardThe Tax Cuts and Jobs (TCJ) Act of December 2017 introduced the largest reform to the U.S. tax code in more than three decades. One of the most significant changes involved the introduction and refinement of wage income taxes with standard deductions for low-income workers. This change can be introduced into the representative consumer's problem by considering a tax rate of t = 0 for the first I units of real wage income, followed by a proportional tax t on each unit of real wage income greater than r. Therefore, the consumer's optimization problem can be re-expressed as follows: Max U(C,1) subject to Jw(h - 1) + a, ifw(h – 1) 0 I. Determine the effects of the introduction of the deduction on tax payıments. In particular (a) Graph the consumer's budget constraint. (b) Determine the optimization point for the case of a person who does not pay any taxes. Graph. (c) Determine the optimization point for the case of a person who pays taxes. Graph.arrow_forwardThe statutory marginal tax rate for income levels between $0 and $100,000 is 25%. The statutory marginal tax rate for income levels above $100,000 is 50%. A family with a child purchases 800 hours of childcare per year. The hourly rate for childcare was $10 in 2020. Families can deduct childcare expenditures up to $8,000. One spouse worked during the year while the other spouse did not earn income. The spouse that worked can claim a tax credit of $6,000. What is the after-tax income available to the family when the spouse that worked earned $100,000 in 2020? What is the effective tax rate (taxes paid over total pre-tax income). What is the after-tax income available to the family when the spouse that worked earned $200,000 in 2020? What is the effective tax rate (taxes paid over total pre-tax income). How does the after-tax price of childcare differ compared to the family with income = $100,000. There is an inflation rate of 100% between 2020 and 2021. The…arrow_forward
- President Clinton has seized the cigarette excise tax as an expedient and politically correct means of increaseing federal revenue. In 1994 the federal government took in $12 billion from the present 24-cents-per-pack tax. If the tax were quadrupled to $1 a pack, Clinton figures tax revenues would increase by more than $50 billion over three years. Those added revenues would help finance the heath care reforms the president so dearly wants. Professor Gary Becker, a Nobel Prize-winning economist at the University of Chicago,says Clinton math is wrong. The White House assumed that cigarettes sales would drop by 4 percent for every 10 percent increase in prices, not the full adjustment of smokers' behavior. Over a three-year period, cigarette consumption is likely to decline by 8 percent for every 10 percent increase in price-twice as much as Clinton assumed.As a result,the $1-a-pack tax will bring in much less revenue than President Clinton projected. According to Professor Becker, by…arrow_forward←05 Survey Junkie 17 Gmail C https:/Assign W 2 https://highschools.foolproofonline.info/modules/taxes/board13.php YouTube Maps Dashboard - HMH Ed Okay, more Practice Questions: This is: Identify the type of tax for each example. Example 1: You are charged this tax by the federal government on your yearly pay. O Income Tax. O Sales Tax. O Property Tax. O Excise Tax. This is: Example 2: You own a piece of property and receive a tax bill from the state each year. O Income Tax. O Sales Tax. O Property Tax. O Excise Tax. EN Anglais (ats-Unis) E $ 4 0.6.76 Edmen w foolpro Cc X R 5 T Y & 7 F9 8arrow_forwardIn a certain country, income tax is assessed as follows: There is NO tax on income up to $15,000. Income over $15,000 up to $30,000 is taxed at 12%. Income over $30,000 is taxed at 18%. Answer the following questions in a paragraph. 1) Write the piecewise function of this country (make sure to use decimals instead of percent). 2) Determine how much tax is to be paid on an income of $20,000.arrow_forward
- Compare the tax breaks for two different income groups in the Bush 2006 tax billarrow_forwardThere are two individuals in a society. The federal income tax in this society is such that that the first $20,000 of income is taxed at 10% and income above that is taxed at 30%. The federal government allows taxes paid to local governments to be deducted. James earns a gross income of $40,000, and Jane earns a gross income of $65,000. Out of his income, James pays $1,000 in local taxes; out of her income, Jane pays $20,000 in local taxes. Which of the following statements is true? a. The federal tax system is proportional. b. James’ total (local + federal) tax bill is greater than Jane’s total tax bill. c. The federal tax system is regressive d. The federal tax system is progressive.arrow_forwardThere are two individuals in a society. The federal income tax in this society is such that that the first $20,000 of income is taxed at 10% and income above that is taxed at 30%. The federal government allows taxes paid to local governments to be deducted. James earns a gross income of $40,000, and Jane earns a gross income of $65,000. Out of his income, James pays $1,000 in local taxes; out of her income, Jane pays $20,000 in local taxes. Which of the following statements is true? A.The federal tax system is progressive. B.James’ total (local + federal) tax bill is greater than Jane’s total tax bill. C.The federal tax system is proportional. D.The federal tax system is regressivearrow_forward
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