If Congress increases the income tax rate such that Song’s average tax rate increases from 15...

Question

If Congress increases the income tax rate such that Song’s average tax rate increases from 15 percent to 20 percent, how much more income tax will she pay assuming that the income effect is descriptive? (Round your intermediate calculations and final answer to 2 decimal places.)

Robert · Accepted Answer

Under the current income tax, Song has $85000 of income after tax. If the income effect is descriptive and Congress increases tax rates so that Song’s average tax rate is 20%. Song will need to earn to $85000/.80 = $106250 to continue to have $85000 of i
Under the current income tax,

If Congress increases the income tax rate such that Song’s average tax rate increases from 15 percent to 20 percent, how much more income tax will she pay assuming that the income effect is...

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