Junior Earns $80,000 Taxable Income as a Regional Circuit Stock

question 61

Essay

Junior earns $80,000 taxable income as a regional circuit stock car driver and is taxed at an average rate of 25 percent (i.e.,$20,000 of tax).If Congress increases the income tax rate such that Junior's average tax rate increases from 25% to 30%,how much more income tax will he pay assuming that the income effect is larger than the substitution effect? What effect will this tax rate change have on the tax base and tax collected? What will happen to the government's tax revenues if Junior chooses to spend more time pursuing his other passions besides work (e.g.,earns only $60,000 in taxable income)in response to the tax rate change? What is the term that describes this type of reaction to a tax rate increase? (Round your answers to two decimal places.)

---

Definitions:

Harry Potter Trivia

Facts, details, or pieces of information related to the Harry Potter series, typically used in quizzes or as entertainment.

Potterhead

A fan or enthusiast of the Harry Potter series, often deeply knowledgeable about the universe created by J.K. Rowling.

Standardized

The process of making something conform to a standard, ensuring consistency across different instances or measurements.

National Statistical Agency

A national statistical agency is an official government organization responsible for the collection, analysis, and publication of statistical information about a country's economy, population, and society.