Congress Would Like to Increase Tax Revenues by 35 Percent

question 40

Essay

Congress would like to increase tax revenues by 35 percent. Assume that the average taxpayer in the United States earns $58,000 and pays an average tax rate of 12 percent. If the income effect is larger than the substitution effect, what average tax rate will result in a 35 percent increase in tax revenues? This is an example of what type of forecasting?