Any income tax schedule embodies two types of tax rates: average tax rates and marginal

Chapter 12, Problem Problems and Applications 12.10

(choose chapter or problem)

Any income tax schedule embodies two types of tax rates: average tax rates and marginal tax rates. a. The average tax rate is defined as total taxes paid divided by income. For the proportional tax system presented in Table 7, what are the average tax rates for people earning $50,000, $100,000, and $200,000? What are the corresponding average tax rates in the regressive and progressive tax systems? b. The marginal tax rate is defined as the extra taxes paid on additional income divided by the increase in income. Calculate the marginal tax rate for the proportional tax system as income rises from $50,000 to $100,000. Calculate the marginal tax rate as income rises from $100,000 to $200,000. Calculate the corresponding marginal taxrates for the regressive and progressive taxsystems.c. Describe the relationship between averagetax rates and marginal tax rates for each ofthese three systems. In general, which rateis relevant for someone deciding whetherto accept a job that pays slightly more thanher current job? Which rate is relevant forjudging the vertical equity of a tax system?