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Chapter 6: Q. 6.13 (page 141)

What was the company's marginal city income tax rate in 2018? Did this company experience proportional, progressive, or regressive taxation? Explain briefly.

Short Answer

Expert verified

25%

Progressive

Step by step solution

01

Step1. Given information

Taxable income in 2017: $5,000,000

Taxable income in 2018: $6,000,000

Taxes due in 2017: $250,000

Taxes due in 2018: $500,000

02

Step2. Calculation

Marginal tax rate:

Change in due taxes/ change in taxable income

250000/1000000= 25%

Since, this is higher than the average tax rates, the tax rate can be called as progressive.

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Most popular questions from this chapter

Explain the structure of the U.S. income tax system.

Understand the key factors influencing the relationship between tax rates and the tax revenues governments collect.

The British government recently imposed a unit excise tax of about$154 per ticket on airline tickets for flights to or from London airports. In answering the following questions, assume normally shaped demand and supply curves.

a. Use an appropriate diagram to predict the effects of the ticket tax on the market-clearing price of London airline tickets and on the equilibrium number of flights into and out of London.

b. What do you predict is likely to happen to the equilibrium price of tickets for air flights into and out of cities that are in close proximity to London but are not subject to the new ticket tax? Explain your reasoning.

What was the individual's marginal state income tax rate in 2018? Did this individual experience proportional, progressive, or regressive taxation? Explain briefly.

The following information applies to the market for

a particular item in the absence of a unit excise tax:

a.According to the information in the table,in the

absence ofaunit excise tax,what is the market

price?What is the equilibrium quantity?

b.Suppose that the government decides to subject

producers of this item toaunit excise tax equal

to$2per unit sold.What is the new market

price?What is the new equilibrium quantity?

c.What portion of the tax is paid by producers?

What portion of the tax is paid by consumers?
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