Question

The State of Georgia has a state income tax with the following components:

the state income tax applies only to wages and salaries (e.g. does not include interest and dividends)  

the state allows a standard deduction of $1,000 per person

the state allows a tax credit equal to $150 per person

Taxable income	Marginal Tax rate
0 -$20,000	4%
20,001- 50,000	6%
> 50,000	8%

Explain how restricting taxable income to wages and salaries (as opposed to including interest and dividends) affects the progressivity or regressivity of the state’s income tax.

F. Explain how a tax credit equal to $150 per person affects the progressivity or regressivity of the state income tax.

G. The State is considering allowing each person to take a $100 exemption. If this exemption is implemented, what will be the change (in dollars) in the amount of income tax that Mr. Jones owes?

Answer 1

It makes state income tax regressive. The reason is wages and salaries are earned by poor whileas interest, dividends usually are earned by Rich. Now since poor have to pay taxes whileas rich doesn't have to pay, the tax is regressive

F again tax credit of 150 is progressive. The reason is both rich and poor get 150. The poor gets same tax credit even if he pays less tax than rich

Can not tell any thing about Mr Jones because the question does not mention anything about his income and in which income tax bracket he falls