Question

Tom earns $35,000 per year. The income tax rate on incomes below $20,000 is 10 percent. The rate on income between $20,001 and $35,000 is 15 percent. Which of the following is/are true?a. The income tax is regressive.

b. Tom’s marginal income tax rate is 15 percent.
c. The income tax is progressive.

Answer 1

b. Tom’s marginal income tax rate is 15 percent.

c. The income tax is progressive.

Step-by-step explanation:

If higher incomes are subjected to higher tax rates, then the income tax is progressive. But if higher incomes are subjected to lower tax rates, then the income tax is regressive.

In this case, we can notice an increase in taxes associated with an increase in income, thus, the income tax is progressive.

Since Tom earns $35,000 per year, his income falls into the $20,001 to $35,000 tax range and his marginal income tax rate is 15 percent.

Alternatives b and c are correct.