Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin

Exercise 4

Fifty years ago in the United States, high-income people paid 91 cents in federal personal income taxes on each additional dollar of income they earned. If you found yourself paying such a 91 percent marginal tax rate, how great would be your incentive to find legal loopholes to reduce your federal tax liabilities ? If you found yourself in the lowest federal personal income tax bracket of, say, 15 percent (paying 15 cents in taxes out of each additional dollar earned), would your incentive to find loopholes to reduce your tax bill be the same? Explain.