a.
To calculate: The average tax rate and the marginal tax rate of someone earning
a.
Answer to Problem 4NP
For the earning
Explanation of Solution
Given is the tax slab of individuals,
Below | |
From | |
Above |
For calculation of average tax rate the formula is given here:
For the person earning
Since, the person is earning
For the person earning
Since, the person is earning
Introduction: The government gets the fund from the taxes and borrowings for expenditure purposes like government consumption, investment, national defense, public health, etc. Government changes these tax slabs time to time to give relief to the persons earning lower incomes or charge extra taxes sometimes from the taxpayers.
b.
To compute: The average tax rate and the marginal tax rate with revised data.
b.
Answer to Problem 4NP
For the earning
Explanation of Solution
Given is the tax slab of individuals,
Below | |
From | |
Above |
For calculation of average tax rate the formula is given here:
For the person earning
Since, the person is earning
For calculation of average tax rate the formula is given here:
For the person earning
Since, the person is earning
Introduction: The government gets the fund from the taxes and borrowings for expenditure purposes like government consumption, investment, national defense, public health, etc. Government changes these tax slabs time to time to give relief to the persons earning lower incomes or charge extra taxes sometimes from the taxpayers.
c.
To describe: If the changes in tax rate affect the labor supply of the person, for the person earning
c.
Answer to Problem 4NP
The tax rate lowers in part (b) will not affect the labor supply of the person initially earning
Explanation of Solution
A change in the marginal tax rate does not change the average tax rate of the person earning
Introduction: The government gets the fund from the taxes and borrowings for expenditure purposes like government consumption, investment, national defense, public health, etc. Government changes these tax slabs time to time to give relief to the persons earning lower incomes or charge extra taxes sometimes from the taxpayers.
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