Assume for the following scenario that there is a 10% sales tax on gasoline. Determine the amount of money each individual in the following table spends on gasoline taxes and their average tax rate. Total Taxable Income Average Tax Rate Gasoline Expenditures Total Tax Due Name (Dollars) Tim 10,000 (Dollars) 10,000 (Dollars) Brian 40,000 32,000 Crystal 55,000 38,500 Hilary 85,000 51,000 (Percent) Given the information in the previous table, sales tax on gasoline is because the average tax rate as income rises.

Assume for the following scenario that there is a 10% sales tax on gasoline. Determine the amount of money each individual in the following table spends on gasoline taxes and their average tax rate. Total Taxable Income Average Tax Rate Gasoline Expenditures Total Tax Due Name (Dollars) Tim 10,000 (Dollars) 10,000 (Dollars) Brian 40,000 32,000 Crystal 55,000 38,500 Hilary 85,000 51,000 (Percent) Given the information in the previous table, sales tax on gasoline is because the average tax rate as income rises.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A4 Consider a linear income tax system in which one’s tax owed to government, T, depends on one’s income, I, according to the formula T = a + tI, where 0 < t < 1, and a is a constant. (a) What is the marginal tax rate (MTR)? Does the MTR change with income? (b) What is the average tax rate (ATR) when the income level is I? (c) If the income tax is progressive, then what can you say about the value of a?
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