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Chapter 6: Q. 6.11 (page 140)

What was the individual's marginal state income tax rate in 2018? Did this individual experience proportional, progressive, or regressive taxation? Explain briefly.

Short Answer

Expert verified

Marginal tax rate: 2.5%

Proportional

Step by step solution

01

Step1. Given information

Taxable income in 2017: $200,000

Taxable income in 2018: $220,000

Taxes due in 2017: $5000

Taxes due in 2018: $5500

02

Step2. Calculation

Marginal tax rate:

Change in due taxes/ change in taxable income

500/20000= 2.5%

Since, this is same as the average tax rates of the corresponding years, it is proportional tax change.

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Most popular questions from this chapter

Why is there always a difference between static analysis and dynamic analysis of tax changes?

Between 2017 and 2018, a small businessperson's income increased from 200,000to220,000. The annual state income taxes that she paid increased from 5000to5500. What was her average state income tax rate in each year?

Distinguish between average tax rates and marginal tax rates.

Between 2017 and 2018, the income received by a company located in a city rose from 5,000,000to6,000,000. The annual city income taxes that the company paid increased from 250,000to500,000. What was the company's average city income tax rate in each year?

Why might pressures to satisfy government budget constraints give state governments incentives to seek to tax remote sales even if they were to determine that actual net revenues collected likely would be less than originally estimated?
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