Given the Following Tax Structure, What Is the Minimum Tax

question 52

Essay

Given the following tax structure, what is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to average tax rates? What is the minimum tax that would need to be assessed on Dora to make the tax progressive with respect to effective tax rates?
$$\begin{array} { | l | r | r | r | } \hline { \text { Tuxpayer } } & \text { Salary } & { \text { Muni-Band Interest } } & { \text { Total Tax } } \\\hline \text { Diego } & 30,000 & 10,000 & 1,500 \\\hline \text { Dora } & 50,000 & 5,000 & ? ? ? \\\hline\end{array}$$

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Definitions:

Subjective Approach

An analysis or decision-making process that is based on personal feelings, tastes, or opinions rather than external facts or evidence.

Discount Rate

The interest rate used to discount future cash flows of a financial asset to present value, reflecting the time value of money and investment risk.

Required Return

is the minimum rate of return an investor expects to receive from an investment, considering the investment's risk level.

Flotation Costs

Costs associated with a company issuing new securities, such as fees for underwriting, legal assistance, and registration.