Suppose that a nation decides to introduce a new income tax system with the tax brackets...

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Suppose that a nation decides to introduce a new income tax system with the tax brackets shown in the table. Income range Tax

Average tax rate: 6 % Marginal tax rate: 31 Smith family Income $48,000 Average tax rate: 20 % Marginal tax rate: 42 Washingt

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Answer 1

Answer #1

a) Byrne family

Marginal tax rate = 31%

Average tax rate = 25000-20000*31%/25000 = 6%

b) Smith family

Marginal tax rate = 42%

Average tax rate = 39000-20000*0.31 + 48000-39000*0.42/48000 = 5890+3780/48000 = 20%

c) Washington family

Margina tax rate = 42%

Average tax rate = 5890+62000-39000*0.42/62000 = 5890+9660/62000 = 25%

d) Lee family

Marginal tax rate = 50%

Average tax rate = 5890+70000-39000*0.42+123000-70000*0.50 / 123000 = 5890+13020+26500/123000 = 37%

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Suppose that a nation decides to introduce a new income tax system with the tax brackets...

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