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

question 35

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 descriptive? 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. )

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Definitions:

Masseter Muscle

A facial muscle that plays a major role in the chewing of solid foods, connecting the lower jawbone to the cheekbone.

Orbicularis Oris

A complex of muscles in the face that encircles the mouth, controlling movements like closing or puckering the lips.

Buccinator

A muscle of the cheek that acts to compress the cheek against the teeth and is used in blowing and sucking motions.

Medial Excursion

Medial excursion is the movement of a body part toward the median plane of the body, often used to describe movements of the jaw or limbs.