QUESTION 303. Referring to Fig 2d and the attached table, determine whether average federal individual income tax payments of the top 10%, top 5%, top 1% of households by income, has increased or decreased in the recession years of 1980-81, 1990-91, and 2001 (as compared to immediately prior year). Increased decreased Fig 2d. Avg pre-tax income & Avg federal tax payments by income class; Tax changes & RecessionsSources: NBER, Tax Found., CBO. (Avg federal tax payments = avg. pre-tax income - avg after-tax income)recession years2000600Imajor tax cuts1800Itax increases5001600-avg. pretax income ofTop 1%--avg. pretax income ofTop 5%1400400-avg. pretax income ofTop 10%1200-avg. pretax income ofHighest Quintile1000300-avg. pretax income ofAll Quintiles-Avg. federal taxes paidby Top 1%800Avg. federal taxes paidby Top 5%200600Avg. federal taxes paidby Top 10%Avg. federal taxes paidby Highest Quintile400100-Avg. federal taxes paidby All Quintiles20019791980198119821983198419851986 198719881989 1990 1991199219931994 19951996 19971998 1999 2000 2001 2002 2003 2004 2005 2006 2007recession years2000 2000 | 20002000 200020002000major tax cuts2000 2000 20002000 20002000 2000tax increases20002000avg. pretax income of Top 1%550.0 518.5 514.9 537.1 588.0 647.3 695.1 904.8 731.4 921.1 857.2 822.6 741.5 840.9 807.9 833.0 918.1 1012.6 1161.2 1304.3 1419.6 1551.3 1227.8 1087.6|1160.7| 1380.0|1660.4 1790.8 1873.0avg. pretax income5%248.8 236.9 232.7 238.0 250.6 274.7 285.9 344.3 305.2 346.6 338.2 324.5 304.7 330.3 323.8 334.3 358.7 384.4 423.7 461.9 492.3 522.4 444.3 406.9 430.4 485.8 555.5 582.4 611.2182.8 176.7 174.5 176.1 184.4 199.7 206.4 238.6 220.0 241.6 239.0 230.5 220.1 233.0 231.4 237.6 249.8 267.0 287.5 308.5 328.4 344.4 303.1 283.7 295.9 327.0 362.0 377.7 394.5avg. pretax income of Top 10%avg. pretax income of Highest Quintile140.3 135.7 134.7 134.7 139.2 148.9 152.9 172.5 162.5 174.8 173.9 168.8 162.9 170.1 170.2 173.6 181.8 190.9 202.3 214.7 227.5 236.5 213.9 203.3 210.1 227.8 246.7 256.0 264.7avg. pretax income of All Quintiles63.4 61.3 | 61.1 60.9 | 61.364.0 65.6| 70.4 68.0 71.0 71.6 70.8 69.0 | 70.8 | 71.1| 72.0 74.7 77.2 80.3 84.2 87.8 89.2 | 84.2 | 80.6 81.8 86.3 90.5 93.3 96.0Avg. federal taxes paid by Top 1%203.4 179.3 163.8 148.5 163.2 182.8 187.7 230.7 228.2 273.4 247.5 236.6 221.4 257.2 278.5 297.9 331.7 364.5 405.5 436.1 475.8 512.6 403.3 357.1 367.8 433.1 524.5 559.9 553.3Avg. federal taxes paid by Top 5%79.2 72.9 68.4 62.0 64.171.6 72.6 84.8 87.0 96.2 91.9 | 87.7 84.2 92.8 98.7 104.8 114.1 123.1 134.0 142.3 153.4 161.8 133.2 120.2 122.8 139.4 162.3 169.5 170.7Avg. federal taxes paid by Top 10%54.151.349.2 | 44,5 45,750.4 51.1| 57.959.964.562.7 60,358.4 62.666.2 69.8 74.5 80.385.9 90,4 97.5101.8 86.3 79.179.5 88.6 99.9 104.2 105.2Avg. federal taxes paid by Highest Quintile 38.6 37.0 | 36.2 | 32.8 33.236.1 36.7 41.041.944.843.9 42.4 41.343.545.6 47.5 50.653.5 56.6 59.3 63.766.2 | 57.1 52.952.4 57.563.5 66.1| 66.4Avg. federal taxes paid by All Quintiles14.113.613.712.612.513.4 13.7 14.7 14.715.515.4 15.2 14.815.215.716.0 16.8 17.618.4 19.0 20.120.518.0 16.716.217.318.619.3 19.6avg. pre-tax income in thousands of $avg. tax payments in thousands of $

A recession is the economic condition which brings contraction in the economic activities through…

Answered: 03. Referring to Fig 2d and the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 3

03. Referring to Fig 2d and the attached table, determine whether average federal individual income tax payments of the top 10%, top 5%, top 1% of households by income, has increased or decreased in the recession years of 1980-81, 1990-91, and 2001 (as compared to immediately prior year).

Increased

decreased

Fig 2d. Avg pre-tax income & Avg federal tax payments by income class; Tax changes & Recessions
Sources: NBER, Tax Found., CBO. (Avg federal tax payments = avg. pre-tax income - avg after-tax income)
recession years
2000
600
Imajor tax cuts
1800
Itax increases
500
1600
-avg. pretax income of
Top 1%
--avg. pretax income of
Top 5%
1400
400
-avg. pretax income of
Top 10%
1200
-avg. pretax income of
Highest Quintile
1000
300
-avg. pretax income of
All Quintiles
-Avg. federal taxes paid
by Top 1%
800
Avg. federal taxes paid
by Top 5%
200
600
Avg. federal taxes paid
by Top 10%
Avg. federal taxes paid
by Highest Quintile
400
100
-Avg. federal taxes paid
by All Quintiles
200
1979
1980
1981
1982
1983
1984
1985
1986 1987
1988
1989 1990 1991
1992
1993
1994 1995
1996 1997
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
recession years
2000 2000 | 2000
2000 2000
2000
2000
major tax cuts
2000 2000 2000
2000 2000
2000 2000
tax increases
2000
2000
avg. pretax income of Top 1%
550.0 518.5 514.9 537.1 588.0 647.3 695.1 904.8 731.4 921.1 857.2 822.6 741.5 840.9 807.9 833.0 918.1 1012.6 1161.2 1304.3 1419.6 1551.3 1227.8 1087.6|1160.7| 1380.0|1660.4 1790.8 1873.0
avg. pretax income
5%
248.8 236.9 232.7 238.0 250.6 274.7 285.9 344.3 305.2 346.6 338.2 324.5 304.7 330.3 323.8 334.3 358.7 384.4 423.7 461.9 492.3 522.4 444.3 406.9 430.4 485.8 555.5 582.4 611.2
182.8 176.7 174.5 176.1 184.4 199.7 206.4 238.6 220.0 241.6 239.0 230.5 220.1 233.0 231.4 237.6 249.8 267.0 287.5 308.5 328.4 344.4 303.1 283.7 295.9 327.0 362.0 377.7 394.5
avg. pretax income of Top 10%
avg. pretax income of Highest Quintile
140.3 135.7 134.7 134.7 139.2 148.9 152.9 172.5 162.5 174.8 173.9 168.8 162.9 170.1 170.2 173.6 181.8 190.9 202.3 214.7 227.5 236.5 213.9 203.3 210.1 227.8 246.7 256.0 264.7
avg. pretax income of All Quintiles
63.4 61.3 | 61.1 60.9 | 61.3
64.0 65.6| 70.4 68.0 71.0 71.6 70.8 69.0 | 70.8 | 71.1| 72.0 74.7 77.2 80.3 84.2 87.8 89.2 | 84.2 | 80.6 81.8 86.3 90.5 93.3 96.0
Avg. federal taxes paid by Top 1%
203.4 179.3 163.8 148.5 163.2 182.8 187.7 230.7 228.2 273.4 247.5 236.6 221.4 257.2 278.5 297.9 331.7 364.5 405.5 436.1 475.8 512.6 403.3 357.1 367.8 433.1 524.5 559.9 553.3
Avg. federal taxes paid by Top 5%
79.2 72.9 68.4 62.0 64.1
71.6 72.6 84.8 87.0 96.2 91.9 | 87.7 84.2 92.8 98.7 104.8 114.1 123.1 134.0 142.3 153.4 161.8 133.2 120.2 122.8 139.4 162.3 169.5 170.7
Avg. federal taxes paid by Top 10%
54.1
51.3
49.2 | 44,5 45,7
50.4 51.1| 57.9
59.9
64.5
62.7 60,3
58.4 62.6
66.2 69.8 74.5 80.3
85.9 90,4 97.5
101.8 86.3 79.1
79.5 88.6 99.9 104.2 105.2
Avg. federal taxes paid by Highest Quintile 38.6 37.0 | 36.2 | 32.8 33.2
36.1 36.7 41.0
41.9
44.8
43.9 42.4 41.3
43.5
45.6 47.5 50.6
53.5 56.6 59.3 63.7
66.2 | 57.1 52.9
52.4 57.5
63.5 66.1| 66.4
Avg. federal taxes paid by All Quintiles
14.1
13.6
13.7
12.6
12.5
13.4 13.7 14.7 14.7
15.5
15.4 15.2 14.8
15.2
15.7
16.0 16.8 17.6
18.4 19.0 20.1
20.5
18.0 16.7
16.2
17.3
18.6
19.3 19.6
avg. pre-tax income in thousands of $
avg. tax payments in thousands of $

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