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10. Understanding marginal and average tax rates Using the information provided on the income tax systems in two hypothetical countries, Country A and Country B, complete the following tables. Country A Country B Taxable Income Tax Liability Taxable Income Tax Liability (Dollars) 20,000 (Dollars) 2,000.00 (Dollars) (Dollars) 20,000 $2.000 40,000 10,000.00 40,000 $4,000 60,000 24,000.00 60,000 $6.000 Complete the following table by deriving the marginal tax rates in the income ranges of $20,000 to $40,000 and $40,000 to $60,000 for each country. Taxable Income Range Country A Marginal Tax Rate Country B Marginal Tax Rate (Dollars) 20,000 to 40,000 (Percent) (Percent) 40,000 to 60,000 Complete the following table by deriving the average tax rates at each income level for each country. Taxable Income Country A Average Tax Rate Country B Average Tax Rate (Dollars) (Percent) (Percent) 20,000 40,000 60,000

10. Understanding marginal and average tax rates Using the information provided on the income tax systems in two hypothetical countries, Country A and Country B, complete the following tables. Country A Country B Taxable Income Tax Liability Taxable Income Tax Liability (Dollars) 20,000 (Dollars) 2,000.00 (Dollars) (Dollars) 20,000 $2.000 40,000 10,000.00 40,000 $4,000 60,000 24,000.00 60,000 $6.000 Complete the following table by deriving the marginal tax rates in the income ranges of $20,000 to $40,000 and $40,000 to $60,000 for each country. Taxable Income Range Country A Marginal Tax Rate Country B Marginal Tax Rate (Dollars) 20,000 to 40,000 (Percent) (Percent) 40,000 to 60,000 Complete the following table by deriving the average tax rates at each income level for each country. Taxable Income Country A Average Tax Rate Country B Average Tax Rate (Dollars) (Percent) (Percent) 20,000 40,000 60,000

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### 10. Understanding Marginal and Average Tax Rates Using the information provided on the income tax systems in two hypothetical countries, Country A and Country B, complete the following tables: #### Income Tax Data: | | **Country A** | | **Country B** | | |----------------|--------------------------------|----------------|--------------------------------|----------------| | **Taxable Income (Dollars)** | **Tax Liability (Dollars)** | **Taxable Income (Dollars)** | **Tax Liability (Dollars)** | | 20,000 | 2,000 | 20,000 | 2,000 | | 40,000 | 10,000 | 40,000 | 4,000 | | 60,000 | 24,000 | 60,000 | 6,000 | **Complete the following table by deriving the marginal tax rates in the income ranges of $20,000 to $40,000 and $40,000 to $60,000 for each country.** | **Taxable Income Range (Dollars)** | **Country A Marginal Tax Rate (Percent)** | **Country B Marginal Tax Rate (Percent)** | |------------------------------------|------------------------------------------|------------------------------------------| | 20,000 to 40,000 | | | | 40,000 to 60,000 | | | **Complete the following table by deriving the average tax rates at each income level for each country.** | **Taxable Income (Dollars)** | **Country A Average Tax Rate (Percent)** | **Country B Average Tax Rate (Percent)** | |------------------------------|-----------------------------------------|-----------------------------------------| | 20,000 | | | | 40,000 | | | | 60,000 | | | **Explanation:** In the tables above, the "Taxable Income" columns provide the gross income subject to tax in either Country A or Country B, and the "Tax Liability" columns list the taxes owed at each income level. In the tables you need to complete, the "Marginal Tax Rate" represents the rate of tax applied to each additional dollar earned within specific income ranges ($20,000 to $40,000 and $40,000 to $60,000). Calculating the marginal tax rates involves determining the increase in tax
Transcribed Image Text:### 10. Understanding Marginal and Average Tax Rates Using the information provided on the income tax systems in two hypothetical countries, Country A and Country B, complete the following tables: #### Income Tax Data: | | **Country A** | | **Country B** | | |----------------|--------------------------------|----------------|--------------------------------|----------------| | **Taxable Income (Dollars)** | **Tax Liability (Dollars)** | **Taxable Income (Dollars)** | **Tax Liability (Dollars)** | | 20,000 | 2,000 | 20,000 | 2,000 | | 40,000 | 10,000 | 40,000 | 4,000 | | 60,000 | 24,000 | 60,000 | 6,000 | **Complete the following table by deriving the marginal tax rates in the income ranges of $20,000 to $40,000 and $40,000 to $60,000 for each country.** | **Taxable Income Range (Dollars)** | **Country A Marginal Tax Rate (Percent)** | **Country B Marginal Tax Rate (Percent)** | |------------------------------------|------------------------------------------|------------------------------------------| | 20,000 to 40,000 | | | | 40,000 to 60,000 | | | **Complete the following table by deriving the average tax rates at each income level for each country.** | **Taxable Income (Dollars)** | **Country A Average Tax Rate (Percent)** | **Country B Average Tax Rate (Percent)** | |------------------------------|-----------------------------------------|-----------------------------------------| | 20,000 | | | | 40,000 | | | | 60,000 | | | **Explanation:** In the tables above, the "Taxable Income" columns provide the gross income subject to tax in either Country A or Country B, and the "Tax Liability" columns list the taxes owed at each income level. In the tables you need to complete, the "Marginal Tax Rate" represents the rate of tax applied to each additional dollar earned within specific income ranges ($20,000 to $40,000 and $40,000 to $60,000). Calculating the marginal tax rates involves determining the increase in tax
**Income Tax System Classification** **Instructions:** Complete the following table by indicating whether each country has a progressive, proportional, or regressive income tax system. | | Progressive | Proportional | Regressive | |------------------|:-----------:|:------------:|:----------:| | **Country A** | ○ | ○ | ○ | | **Country B** | ○ | ○ | ○ | - **Progressive**: A progressive tax system is one in which the tax rate increases as the taxable amount increases. Higher-income earners pay a higher percentage of their income in taxes compared to lower-income earners. - **Proportional**: A proportional tax system, also known as a flat tax, is one in which the tax rate is the same at all levels of income. Every taxpayer pays the same percentage of their income regardless of how much they earn. - **Regressive**: A regressive tax system is one in which the tax rate decreases as the taxable amount increases. Lower-income earners pay a higher percentage of their income in taxes compared to higher-income earners.
Transcribed Image Text:**Income Tax System Classification** **Instructions:** Complete the following table by indicating whether each country has a progressive, proportional, or regressive income tax system. | | Progressive | Proportional | Regressive | |------------------|:-----------:|:------------:|:----------:| | **Country A** | ○ | ○ | ○ | | **Country B** | ○ | ○ | ○ | - **Progressive**: A progressive tax system is one in which the tax rate increases as the taxable amount increases. Higher-income earners pay a higher percentage of their income in taxes compared to lower-income earners. - **Proportional**: A proportional tax system, also known as a flat tax, is one in which the tax rate is the same at all levels of income. Every taxpayer pays the same percentage of their income regardless of how much they earn. - **Regressive**: A regressive tax system is one in which the tax rate decreases as the taxable amount increases. Lower-income earners pay a higher percentage of their income in taxes compared to higher-income earners.
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