Help 4 73 Sun 1119 PM a e newconnectmheducationcom MHE Reade

Help 4) 73% Sun 11:19 PM a e- newconnect.mheducation.com MHE Reader eck my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to question 3 Song earns s100.000 taxable income as an interior designer and is taxed at an average rate of 20 percent (Gie $20,000 of tax, a. If Congress increases the income tax rate such that Song\'s average tax rate increases from 20 percent to 25 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.) 3 Answer is complete but not entirely correct. 106,666.67 b. If the income effect is descriptive, the tax base and the tax collected will increase False

Solution

Your calculation 100% correct. But you should enter the additional tax only. i.e 6,666.67

In descriptive model, firstly we take after tax current income equal to after tax future income

( 100,000 - 20000) = X ( 1 - 0.25)

0.75 * X = 80000

X = 106,666.67

So additional tax = 106,666.67 - 100,000 = 6,666.67...............final answer