Microeconomics: Principles Problems & Policies (McGraw-Hill Series in Economics)
20th Edition
ISBN: 9780077660727
Author: McConnell
Publisher: MCG
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Chapter 18, Problem 12DQ
To determine
The regressive tax system and its redistribution.
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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. what is average tax rate ?
Suppose taxes are related to income as follows: Income Taxes $1,000 $200 $2,000 $350 $3,000 $450 a. What percentage of income is paid in taxes at each level? b. Is the tax rate progressive, proportional, or regressive? c. What is the marginal tax rate on the first $1,000 of income? The second $1,000? The third $1,000?
4.7) Consider a national income tax that is structured as follows:
Income
Marginal tax
rate
$0-$10,000
0%
$10,001--
$60,000
5%
$60,001and
above
0%
For each of the following workers determine his or her marginal and average tax rate
d.
Would you describe the tax system as proportional, regressive, or progressive? Explain
Chapter 18 Solutions
Microeconomics: Principles Problems & Policies (McGraw-Hill Series in Economics)
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- Suppose that gifts were taxed at a rate of 10 for amounts up to 100,000 and 20 for anything over that amount. Would this tax be regressive or progressive?arrow_forwardSuppose in Fiscalville there is no tax on the first $10,000 of income, but 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. 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?arrow_forwardSuppose 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 taxesarrow_forward
- What is meant by a progressive tax? A regressive tax? A proportional tax? Comment on the progressivity or regressivity of each of the following taxes, indicating in each case where you think the tax incidence lies: (a) the Federal personal income tax; (b) a 4 percent state general sales tax; (c ) a Federal excise tax on automobile tires; (d) a municipal property tax on real estate; (e) the Federal corporate income tax; (f ) the portion of the payroll tax levied on employers.arrow_forwardFederal payroll taxes to fund the EI program are levied at a combined rate of 1.58 percent up to an income ceiling of $54,200. a. If there was a limit on the income level at which these taxes apply, would they be proportional, progressive, or regressive? With no limit, are the taxes proportional, progressive, or regressive? b. The amount of EI benefits that people receive depends on the amount of payroll taxes they paid. Relative to people who had low earnings, people who had higher earnings and paid more 3 in taxes receive more benefits, but not proportionally more. Does this feature of the EI system make EI a progressive or a regressive payroll tax?arrow_forwardSuppose a tax is such that an individual with an income of $10,000 pays $2,000 of tax, a person with an income of $20,000 pays $3,000 of tax, a person with an income of $30,000 pays $4,000 of tax, and so forth. What is each person’s average tax rate? Is this tax regressive, proportional, or progressive?arrow_forward
- Table 27-1 Y = C + I + G C = 500 + 0.8(Y − T) I = 300 G = 700 T = 0.25Y Table 27-1 Y = C + I + G C = 500 + 0.8(Y−T) I = 300 G = 700 T = 0.25Y Refer to Table 27-1. What is the level of tax revenues in this model? a. 1,000 b. 937.5 c. 437.5 d. 950 e. 945.5arrow_forwardAssume that the federal government replaces the federal income tax with a national sales tax on all consumption expenditures. Analyze the impact of this tax change on taxation efficiency and equity? Note that the federal government already collects a nationwide consumption tax through excise taxes on gasoline, liquor and tobacco.arrow_forwardSuppose 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_forward
- What type of tax raises the most revenue for the federal government? What is the largest source of revenue for state and local governments? What is the difference between a progressive tax and a regressive tax? Give an example of each.arrow_forwardWhen government tax policy requires Nathan to pay $30,000 in taxes on annual income of $300,000 and John to pay $18,000 in tax on annual income of $100,000, then the tax policy is: Group of answer choices optional. progressive. regressive. proportional.arrow_forwardPaying a tax of $15 on an income of $200, a tax of $10 on an income of $300, and a tax of $8 on an income of $400 is an example of a: O a) progressive tax. O b) b) regressive tax. O c) proportional tax. O d) constant-rate tax.arrow_forward
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