After tax income pretax income 1 tax rate 80000

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After-tax income = Pretax income (1 – tax rate) $80,000 = Pretax income (1 -.25) Pretax income = $106,666.67 Song will pay $26,666.67 in tax ($106,666.67 x .25). Accordingly, if the income effect is descriptive, the tax base and the tax collected will increase.
(52) [LO3, LO5] Using the facts from the previous problem, what will happen to the government’s tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and earns only $75,000 in taxable income? What is the term that describes this type of reaction to a tax rate increase? What types of taxpayers are likely to respond in this manner?
(53) [LO5] Given the following tax structure, what tax would need to be assessed on Venita to make the tax horizontally equitable?
(54) [LO5] Using the facts in the previous problem, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable based on the tax rate paid? This would result in what type of tax rate structure?
(55) [LO5] Using the facts in the previous problem, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable with respect to the amount of tax paid? This would result in what type of tax rate structure? 8

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