Consider an income-tax system that has four tax brackets. The following table shows the marginal tax rate that applies to the income in each tax bracket.
Earned Income Tax Rate in Bracket
Up to $20 000…………………………. 0%
$20 001-$40 000………………………15%
$40 001-$80 000…………………....... 30%
$80 001 and higher…………………… 35%
a. Compute the average income-tax rate at income levels $10 000, $20 000, and each increment of $10 000 up to $120 000.
b. Compute the marginal income-tax rate for each level of income in part (a).
c. On a graph with the tax rates on the vertical axis and income on the horizontal axis, plot the average and marginal tax rates for each level of income.
d. Is this tax system progressive? Explain.