A tax provision has been discussed that would add an additional marginal tax rate of 42% to be applied to an individual's taxable income in excess of $800,000. If this provision were to become law, what overall distributional impact would it have on our current income tax system?

Question

Quizplus · Accepted Answer

Adding an additional marginal tax rate of 42% on taxable income above $800,000 would increase the progressivity of the income tax system. Progressivity means that those with higher incomes pay a greater share of their income in taxes. This provision would only affect a small portion of the population with very high incomes, making it a targeted approach to increasing progressivity. Therefore, the overall distributional impact of this provision would be progressive.

A Tax Provision Has Been Discussed That Would Add an Additional