Chapter 6: Q 6.2 (page 124)
Explain the structure of the U.S. income tax system.
The U.S. income tax system emphasizes Personal Income Tax and Corporate Tax.
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Distinguish between average tax rates and marginal tax rates.
Aseniorcitizengetsapart-timejobatafast-food
restaurant.Sheearns\(8perhourforeachhoursheworks,andsheworksexactly25hoursperweek.Thus,hertotalpretaxweeklyincomeis\)200.Hertotalincometaxassessmenteachweekis\(40.Shepays\)3intaxesforthefinalhoursheworkseachweek.
a. What is this person's average tax rate each week?
b. What is the marginal tax rate for the last hour
she works each week?
For purposes of assessing income taxes, there are three official income levels for workers in a small country: high, medium, and low. For the last hour on the job during a 40-hour workweek, a high income worker pays a marginal income tax rate of 15 percent, a medium-income worker pays a marginal tax rate of 20 percent, and a low-income worker is assessed a 25 percent marginal income tax rate. Based only on this information, does this nation's income tax system appear to be progressive, proportional, or regressive?
Why do you suppose that economists commonly refer to the elimination of all disability payments from the people able to work part time as a 'tax' imposed on disabled individual who is willing and able to earn part time income.
If average income tax rates paid by lowest income taxpayers were increased to equality with those paid by the highest income taxpayers, would the US income tax system more or less progressive ? Explain your reasoning .
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