Question 1

Suppose the income tax rate is zero on the first $10,000;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on all income above $70,000.Family A has income of $100,000 while Family B has income of $40,000.The marginal tax rate for A will be ________% and for B will be ________%.

Accepted Answer

The answer of Suppose the income tax rate is zero...

Question 2

The Canadian Goods and Services Tax is

Accepted Answer

The Canadian Goods and Services Tax (GST) is considered a regressive tax because it taxes consumption at the same rate for both rich and poor. This means that it has a larger impact on lower-income earners because they spend a higher proportion of their income on consumption goods compared to high-income earners who are able to save a larger proportion of their income.

Question 3

Provincial sales taxes are

Accepted Answer

Provincial sales taxes are often considered regressive because they apply to consumption, which tends to be a larger proportion of lower income earners' spending than higher income earners' spending. Therefore, a fixed tax on consumption (i.e. a sales tax) will take a greater proportion of a low-income earner's income than a high-income earner's income, making it regressive.

Question 4

Suppose the income tax rate schedule is 0% on the first $10,000;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on any income over $70,000.Family A earns $28,000 a year and Family B earns $65,000 a year.Both receive a ten percent raise.The additional tax owed by A is ________ and the extra tax owed by B is ________.

Accepted Answer

The answer of Suppose the income tax rate schedule is...

Question 5

Suppose the tax rate on the first $10,000 income is zero 10% on the next $20,000;20% on the next $20,000;30% on the next $30,000;and 40% on any income over $80,000.Family A has income of $40,000 and Family B has income of $100,000.What is the marginal and average tax rate for each family?

Accepted Answer

Family A's income of $40,000 falls into the 20% tax bracket for the last dollar earned, making the marginal rate 20%. The average tax rate is calculated by considering the tax on the first $10,000 (0%), then 10% on the next $20,000 ($2,000), and 20% on the final $10,000 ($2,000), totaling $4,000 in tax. $4,000 of $40,000 is 10%. Family B's income of $100,000 puts the last dollar in the 40% bracket, making the marginal rate 40%. The average tax rate is calculated by summing the taxes across all brackets: $0 for the first $10,000, $2,000 for the next $20,000, $4,000 for the following $20,000, $9,000 for the next $30,000, and $8,000 for the last $20,000 (40% of $20,000), totaling $23,000 in tax. $23,000 of $100,000 is 23%.

Question 6

Suppose the tax rate on the first $10,000 of income is zero;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on income over $70,000.Family C has an income of $100,000.What is family C's average tax rate?

Accepted Answer

Family C's income is $100,000. The tax calculation is as follows: $0 for the first $10,000; 10% of $20,000 is $2,000; 20% of $20,000 is $4,000; 30% of $20,000 is $6,000; and 40% of $30,000 (the amount over $70,000) is $12,000. The total tax is $2,000 + $4,000 + $6,000 + $12,000 = $24,000. The average tax rate is the total tax divided by total income: $24,000 / $100,000 = 0.24 or 24%.

Question 7

A tax system characterized by a constant average tax rate is known as a

Accepted Answer

A proportional tax system is characterized by a constant average tax rate, where individuals or entities pay the same percentage of their income or wealth in taxes regardless of their income level. This is often seen as a "fair" system as everyone pays the same rate proportionally.

Question 8

A tax system characterized by a constant marginal tax rate is a

Accepted Answer

A tax system characterized by a constant marginal tax rate is a proportional tax system. In a proportional tax system, everyone pays the same percentage of their income in taxes, regardless of how much they earn. It is also referred to as a flat tax system. This is different from a progressive tax system, where those who earn more pay a higher percentage of their income in taxes, and a regressive tax system, where those who earn less pay a higher percentage of their income in taxes. A fair tax system is subjective and can vary from person to person depending on their views on taxation.

Question 9

Suppose the income tax rate is 0% on the first $10,000;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on any income over $70,000.Family A earns $28,000 a year and Family B earns $65,000 a year.Both receive a ten percent raise,after which A's marginal tax rate is ________% and B's marginal tax rate is ________%.

Accepted Answer

The answer of Suppose the income tax rate is 0%...

Question 10

Suppose the tax rate on the first $10,000 of income is zero;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on income over $70,000.Family C has an income of $100,000.The family's average tax rate is ________%.

Accepted Answer

The answer of Suppose the tax rate on the first...

Question 11

Suppose the income tax rate schedule is 0% on the first $10,000;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on any income over $70,000.Family A earns $28,000 a year and Family B earns $65,000 a year.Both receive a ten percent raise.What is the marginal tax rate of each and what is the extra tax paid by each after the raise?

Accepted Answer

- For Family A: 
- Before the raise, their taxable income is $18,000 ($28,000 - $10,000). So, they fall in the 10% tax bracket, hence their current marginal tax rate is 10%. 
- After the raise, their income will be $30,800 ($28,000 + 10%), and their taxable income will be $20,800 ($30,800 - $10,000). 
- $20,800 falls in the 20% tax bracket, hence their new marginal tax rate is 20%. 
- The extra tax paid will be $360 [$20,800 * (20% - 10%)].

- For Family B: 
- Before the raise, their taxable income is $55,000 ($65,000 - $10,000). So, they fall in the 30% tax bracket, hence their current marginal tax rate is 30%. 
- After the raise, their income will be $71,500 ($65,000 + 10%), and their taxable income will be $61,500 ($71,500 - $10,000). 
- $61,500 falls in the 40% tax bracket, hence their new marginal tax rate is 40%. 
- The extra tax paid will be $2,100 [$20,000 * 10% + $20,000 * 20% + $20,000 * 30% + ($61,500 - $70,000) * 40%].

Therefore, the best choice is option C.

Question 12

A proportional income tax structure implies that

Accepted Answer

A proportional income tax structure means that the marginal tax rate is constant across all income levels, not changing with the amount of income earned.

Question 13

Suppose the income tax rate is 0% on the first $20,000,20 percent on the next $20,000,30 percent on the next $20,000,40 percent on the next $20,000,and 50 percent on all income over that.The Arm family has a taxable income of $80,000.What is the average tax rate for this family?

Accepted Answer

The Arm family's total tax can be calculated as follows: 0% on the first $20,000 = $0, 20% on the next $20,000 = $4,000, 30% on the next $20,000 = $6,000, 40% on the next $20,000 = $8,000, and 50% on income over $80,000 = $0 (since their income is $80,000). The total tax is $0 + $4,000 + $6,000 + $8,000 = $18,000. The average tax rate is the total tax divided by total income: $18,000 / $80,000 = 0.225 or 22.5%.

Question 14

The marginal tax rate applies to

Accepted Answer

The marginal tax rate applies to the income in the highest tax bracket reached. This means that as a taxpayer's income increases and they move into a higher tax bracket, the marginal tax rate will apply only to the amount of income that falls within that bracket. It does not apply to all income earned by a family or just the income of the richest Canadians.

Question 15

Suppose the income tax rate is zero on the first $10,000;is 10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on all income above $70,000.Family A has income of $100,000 while Family B has income of $40,000.The marginal tax rate on the two families are

Accepted Answer

The marginal tax rate is the rate at which the last dollar of income is taxed. Family A, with an income of $100,000, falls into the 40% tax bracket for income above $70,000. Family B, with an income of $40,000, falls into the 20% tax bracket for income between $30,000 and $50,000.

Question 16

A flat-tax on all personal income would be an example of

Accepted Answer

A flat-tax is a proportional tax, as it applies the same tax rate to all levels of income. A regressive tax would unfairly burden lower-income individuals, while a progressive tax would have a higher tax rate for those with higher incomes. A value-added tax is a type of consumption tax.

Question 17

The marginal tax rate is equal to

Accepted Answer

The marginal tax rate is the rate at which an additional unit of income is taxed. It is calculated as the change in tax payment divided by the change in taxable income. Choice A is incorrect because the marginal tax rate is not the same as the average tax rate, which is calculated as the total tax payment divided by total income. Choice B is incorrect because it describes the tax burden rather than the marginal tax rate. Choice D is also incorrect because it calculates the average tax rate, not the marginal tax rate.

Question 18

A tax system characterized by a constant marginal tax rate is a

Accepted Answer

A constant marginal tax rate means that the percentage of tax paid stays the same, regardless of the amount of income earned. This is characteristic of a proportional tax system, where the tax rate is applied uniformly to all taxpayers regardless of their income.

Question 19

The marginal tax rate and the average tax rate are the same under a

Accepted Answer

Under a proportional income tax system, the marginal tax rate and the average tax rate are the same. This is because under a proportional tax system, the tax rate is constant and does not change with the level of income earned. In contrast, under a progressive tax system, the marginal tax rate (the rate at which additional income is taxed) is higher than the average tax rate (the overall tax rate on all income earned) at higher levels of income. Similarly, under a regressive tax system, the marginal tax rate is lower than the average tax rate at higher levels of income. Finally, under a consumption tax system, the marginal tax rate and the average tax rate may be different, depending on the design of the tax system.

Question 20

Suppose the income tax rate is 0 on the first $20,000,20 percent on the next $20,000,30 percent on the next $20,000,40 percent on the next $20,000,and 50 percent on all income over that.The Arm family has a taxable income of $80,000.The average tax rate for this family is ________%.

Accepted Answer

The answer of Suppose the income tax rate is 0...

Quiz 10: The Public Sector

Suppose the income tax rate is zero on the first $10,000;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on all income above $70,000.Family A has income of $100,000 while Family B has income of $40,000.The marginal tax rate for A will be % and for B will be %.

The Canadian Goods and Services Tax is

Provincial sales taxes are

Suppose the tax rate on the first $10,000 income is zero 10% on the next $20,000;20% on the next $20,000;30% on the next $30,000;and 40% on any income over $80,000.Family A has income of $40,000 and Family B has income of $100,000.What is the marginal and average tax rate for each family?

Suppose the tax rate on the first $10,000 of income is zero;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on income over $70,000.Family C has an income of $100,000.What is family C's average tax rate?

A tax system characterized by a constant average tax rate is known as a

A tax system characterized by a constant marginal tax rate is a

Suppose the tax rate on the first $10,000 of income is zero;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on income over $70,000.Family C has an income of $100,000.The family's average tax rate is ________%.

A proportional income tax structure implies that

Suppose the income tax rate is 0% on the first $20,000,20 percent on the next $20,000,30 percent on the next $20,000,40 percent on the next $20,000,and 50 percent on all income over that.The Arm family has a taxable income of $80,000.What is the average tax rate for this family?

The marginal tax rate applies to

Suppose the income tax rate is zero on the first $10,000;is 10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on all income above $70,000.Family A has income of $100,000 while Family B has income of $40,000.The marginal tax rate on the two families are

A flat-tax on all personal income would be an example of

The marginal tax rate is equal to

A tax system characterized by a constant marginal tax rate is a

The marginal tax rate and the average tax rate are the same under a

Suppose the income tax rate is 0 on the first $20,000,20 percent on the next $20,000,30 percent on the next $20,000,40 percent on the next $20,000,and 50 percent on all income over that.The Arm family has a taxable income of $80,000.The average tax rate for this family is ________%.