Congress Would Like to Increase Tax Revenues by 20 Percent

question 34

Essay

Congress would like to increase tax revenues by 20 percent. Assume that the average taxpayer in the United States earns $80,000 and pays an average tax rate of 17.5 percent. If the income effect is larger than the substitution effect, what average tax rate will result in a 20 percent increase in tax revenues? This is an example of what type of forecasting?

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Definitions:

Berne Convention

An international agreement that protects the rights of authors in their literary and artistic works across member countries.

Artistic Rights

The legal rights granted to creators over their artistic works, including the right to control use, reproduction, and distribution, often encompassed under copyright laws.

Copyrights

Legal protections granted to the creators of original works, providing them exclusive rights to use and distribute their work for a certain period.

Paris Convention

An international treaty designed to provide a unified set of rules for the protection of intellectual property rights across the signatory countries.