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10 September, 05:18

Congress would like to increase tax revenues by 17 percent. assume that the average taxpayer in the united states earns $52,000 and pays an average tax rate of 20 percent.

a. if the income effect is in effect for all taxpayers, what average tax rate will result in a 17 percent increase in tax revenues? (round your answer to 2 decimal places.)

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  1. 10 September, 05:40
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    Calculation of average tax rate that will result in a 17 percent increase in tax revenues:

    Currently, the average taxpayer in the united states earns $52,000 and pays an average tax rate of 20 percent, so the average tax revenue is 52000*20% = $10,400

    If Congress wants to increase tax revenues by 17 percent, then the average tax revenue shall be 10400 + (10400*17%) = $12,168

    Hence average tax rate that will result in a 17 percent increase in tax revenues shall be = 12168 / 52000 = 0.234 = 23.40%
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