Question

Between 2017 and​ 2018, a small​ businessperson's income increased from​ $200,000 to​ $220,000. The annual state...

Between 2017 and​ 2018, a small​ businessperson's income increased from​ $200,000 to​ $220,000. The annual state income taxes that she paid increased from

​5,000

to

​$6,200.

What was her marginal state income tax rate in​ 2018? Did this individual experience​ proportional, progressive, or regressive​ taxation? Explain briefly

This small​ businessperson's marginal state income tax rate in 2018 was

what

percent? ​(Enter your response rounded to one decimal​ place.)

Her average state income tax rate in 2018 was

what

percent?​(Enter your response rounded to one decimal​ place.)

This individual experienced

progressive

proportional

regressive

taxation because her marginal tax rate was

greater than

less than

equal to

her average tax rate?

Business   Economics   
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Answer #1

Marginal state income tax rate in​ 2018 = [(6,200 - 5,000) / (220,000 - 200,000)] * 100 = 6.0%

Average state income tax rate in 2018 = (6200 / 220,000) * 100 = 2.8%

This individual experienced progressive taxation because her marginal tax rate was greater than her average tax rate.

Explanation:

If the average tax rate equals the marginal tax rate, then it is called proportional tax.

If the average tax rate is higher than the marginal tax rate, then it is called regressive tax.

If the average tax rate is lower than the marginal tax rate, then it is called progressive tax.

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