b an average tax rate of 220 percent when her income is 50000 c a marginal tax

B an average tax rate of 220 percent when her income

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b. an average tax rate of 22.0 percent when her income is $50,000. c. a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001. d. a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001. ANS: B DIF: 2 REF: 12-2 NAT: Analytic LOC: The role of government TOP: Average tax rates | Marginal tax rates MSC: Applicative
Chapter 12 /The Design of the Tax System 1061 57. Refer to Scenario 12-3. At what level of income would the taxpayer’s marginal tax rate be 30 percent and her average tax rate be 25 percent? a. $42,000 b. $57,000 c. $60,000 d. $80,000 ANS: D DIF: 3 REF: 12-2 NAT: Analytic LOC: The role of government TOP: Average tax rates | Marginal tax rates MSC: Applicative 58. The deadweight loss of an income tax is determined by the a. amount of total tax revenue to the government. b. marginal tax rate. c. average tax rate. d. ability-to-pay principle. ANS: B DIF: 2 REF: 12-2 NAT: Analytic LOC: Efficiency and equity TOP: Deadweight losses | Marginal tax rates MSC: Interpretive 59. A person's marginal tax rate equals a. her tax obligation divided by her average tax rate. b. the increase in taxes she would pay as a percentage of the rise in her income. c. her tax obligation divided by her income. d. the increase in taxes if her average tax rate were to rise by 1%. ANS: B DIF: 1 REF: 12-2 NAT: Analytic LOC: Efficiency and equity TOP: Marginal tax rates MSC: Definitional 60. In the United States, the marginal tax rate on individual federal income tax a. decreases as income increases. b. increases as income increases. c. is constant at all income levels. d. applies only to payroll taxes. ANS: B DIF: 2 REF: 12-2 NAT: Analytic LOC: Efficiency and equity TOP: Marginal tax rates MSC: Applicative 61. Because the marginal tax rate rises as income rises, a. higher income families, in general, pay a larger percentage of their income in taxes. b. lower income families, in general, pay a larger percentage of their income in taxes. c. a disproportionately large share of the tax burden falls upon the poor. d. higher income families pay the same percentage of their income in taxes as lower-income families. ANS: A DIF: 2 REF: 12-2 NAT: Analytic LOC: Efficiency and equity TOP: Marginal tax rates MSC: Analytical
1062 Chapter 12 /The Design of the Tax System 62. If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is a. 8 percent. b. 12.5 percent. c. 20 percent. d. unknown. We do not have enough information to answer this question. ANS: D DIF: 2 REF: 12-2 NAT: Analytic LOC: Efficiency and equity TOP: Marginal tax rates MSC: Analytical 63. Nancy paid a tax of $0.50 on the last dollar she earned in 1999. Nancy's marginal tax rate in 1999 was a. more than 50 percent. b. exactly 50 percent. c. higher than her average tax rate. d. lower than her average tax rate. ANS: B DIF: 2 REF: 12-2 NAT: Analytic LOC: Efficiency and equity TOP: Marginal tax rates MSC: Definitional 64. If we want to gauge how much the income tax system distorts incentives, we should use the a. average tax rate.

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