Asked by Vanessa Ramirez on Jul 21, 2024
Verified
If Mr.Perot faces a 90 percent marginal tax rate,
A) his average tax rate must be falling.
B) the next dollar he earns nets him 90 cents.
C) his total tax payments equal 90 percent of his income.
D) he has a strong incentive to work harder.
E) he has a strong incentive to work less.
Marginal Tax Rate
The tax rate applied to an individual's or entity's last dollar of income, indicating the percentage of tax paid on additional income.
Average Tax Rate
The fraction of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by the total income.
Incentive To Work
Factors, such as financial rewards or benefits, that motivate individuals to engage in employment.
- Understand the effects of tax regulations on various income brackets, including the economic activities they promote.
Verified Answer
CH
Corrie Hofford CastleJul 27, 2024
Final Answer :
E
Explanation :
A 90 percent marginal tax rate means that for every additional dollar Mr. Perot earns, he keeps only 10 cents and pays 90 cents in taxes. This high tax rate on additional income reduces the incentive to earn more, as the reward for extra effort is significantly diminished.
Learning Objectives
- Understand the effects of tax regulations on various income brackets, including the economic activities they promote.