Chapter 17, Problem 1FT

Subpart (a):

To determine

Percentage of federal taxes.

Explanation of Solution

Using information in Table 36, the percentages of federal taxes paid from the “top down” by the top 40%, top 60%, or top 80% of income earners and from the “bottom up” by the bottom 40%, 60%, or 80% of income earners are mined and tabulated in Table 1.

Table 1

	Share of Total Federal tax revenue		Share of Total Federal tax revenue
Everyone	100%	Everyone	100%
Bottom 20%	0.8%	Top 80%	99%
Bottom 40%	4.9%	Top 60%	94.9%
Bottom 60%	14.2%	Top 40%	85.6%
Bottom 80%	31.1%	Top 20%	68.7%

Economics Concept Introduction

Concept Introduction:

Tax: Tax is the financial charge or obligation that is levied on the taxpayer by the government to meet its public expenditure and other development work in the interest of the country. Tax is one of the biggest sources for the government revenue through which the government meets its expenditure.

Subpart (b):

To determine

Identifying true statements.

Explanation of Solution

Based on the information in Table 1, the following statements are true:

Statement (i) says that the bottom 60% of taxpayers pay less than 25% of federal taxes, and statement (ii) says that the top 80% of taxpayers pay over 98% of federal taxes.

Statement (iii) is false because by the data in Table 1, 40% of taxpayers pay more than 60% of federal taxes.

Economics Concept Introduction

Concept Introduction:

Tax: Tax is the financial charge or obligation that is levied on the taxpayer by the government to meet its public expenditure and other development work in the interest of the country. Tax is one of the biggest sources for the government revenue through which the government meets its expenditure.