Businesses and individuals are frequently concerned about their marginal tax rat
ID: 2885769 • Letter: B
Question
Businesses and individuals are frequently concerned about their marginal tax rate, or rate at which the next dollar earned is taxed. In progressive taxation, the 80,001st dollar earned is taxed at a higher rate than the 25,001st dollar earned and at a lower rate than the 140,001st dollar earned. Use the graph, showing the marginal tax rate for 2014, to answer the following questions Was the taxation in 2014 progressive? Why or why not? 406,731, 30.) 40,101.35 186.331.33 Annual incoe (thousands of dollars) Choose the correct answer below. O The taxation in 2014 was progressive because, according to the graph, the 80,001st dollar earned is taxed at a lower rate than the 25,001st dollar earned and at a higher rate than the 140,001st dolar earned O The taxation in 2014 was not progressive because, according to the graph, the 25.001st dollar earned is taxed at a higher rate than the 140,001st dollar earned. O The taxation in 2014 was not progressive because, according to the graph, the 80,001st dollar earned is taxed at a higher rate than the 140,001st dollar earned. O The taxation in 2014 was progressive because, according to the graph, the 80,001st dollar earned is taxed at a higher rate than the 25,001st dollar earned and at a lower rate than the 140,001st dolar earned.Explanation / Answer
Rate of tax on :
25,001st dollar earned = 15% (falling in 9076- 36900 income category which is taxed at 15% as per the graph).
80,001st dollar earned = 25% (36901-89350 income category)
140,001st dollar earned = 28% (89351-186350 income category in the plot).
Since rate of taxation is increasing with income as found above, thus the taxation in 2014 is progressive.
Hence answer is last (4th) option.
Comment if any doubt.
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