Refer to the accompanying table for Waxwania Government Expe

Refer to the accompanying table for Waxwania Government Expenditures, Revenues Tax Real GDP $160 160 160 160 160 $100 120 $500 600 700 800 900 160 180 Instructions: Enter your answers as whole numbers a. What is the marginal tax rate in Waxwania? percent. b. What is the average tax rate? percent. c. Which of the following describes the tax system: proportional, progressive, or regressive? (Click toi

Solution

Marginal Tax rate is the change in the tax rate with respect to change in output which is constant in the above table i.e (20/100)*100 = 20%.

Average Tax rate is equal to tax divided by output.

100/500 = 0.2 = 20%

A proportional tax is an income tax in which the same percentage of tax is levied from all taxpayers, which is independent of their income.