1. Imagine a friend says that he doesn't want to take a job that pays slightly more money only because he will be bumped into the next tax bracket and end up taking home less income after taxes.

How would you advise this friend?

Define marginal tax rates. Then, explain why tax rates in the United States were designed to be marginal.

2. You learned that Texas has a tax system that is generally "regressive" because it relies heavily on sales taxes rather than income taxes.

What are the definitions of regressive, flat, and progressive when it comes to taxes?

Why is a sales tax considered a regressive tax?

Should Texas adopt an income tax to make the tax system less regressive? Why or why not?

3. Describe the many ways the government affects economic activity.

Explain the positive aspects of this government involvement.

Now, explain the negative aspects of government involvement.

Finally, describe to what extent you believe the government should be involved in the economy, and why.

Answer rating: 100% (QA)

1The marginal tax rate is the amount of additional tax that must be paid for each new dollar of income received The average tax rate is calculated by dividing total tax paid by total income earned A m... View the full answer