This is one Assignment.

Imagine the country is made up of 100 households. The federal government needs to collect $1,100,000 in income taxes to be able to function. The population consists of six (6) groups:

• Group A: 19 households that earn $12,000 each
• Group B: 21 households that earn $29,000 each
• Group C: 21 households that earn $50,000 each
• Group D: 19 households that earn $81,000 each
• Group E: 16 households that earn $130,000 each
• Group F: 4 households that earn $300,000 each

Summary of Flat Tax

Complete the following table:

Progressive Tax

The third proposal we'll consider is a progressive tax, where lower income groups are taxed at a lower percent rate, and higher income groups are taxed at a higher percent rate. For simplicity, we're going to assume that a household is taxed at the same rate on all of their income.

Determine the tax rate necessary for group F to meet the country's financial need ($1,100,000). HINT - Perform your calculations for total tax collected using the given rates for groups A - E. Then determine how much more tax you NEED to collect. Use that figure to determine the tax rate needed for group F.

Effective Rate

Discretionary income is the income people have left over after paying for necessities like rent, food, transportation, etc. The cost of basic expenses does increase with income, since housing and car costs are higher, however usually not proportionally. For each income group, an estimate of their essential expenses has been given. Compute the effective tax rate for each plan, relative to discretionary income (divide the tax paid by the discretionary income). Please remember that you should move your decimal place two places to turn a decimal into a percent. 0.25 would be 25%. 1.15 would be 115%.

Conclusion

Which plan seems the most fair to you? Which plan seems the least fair to you? Why? Make sure to answer in complete sentences with full explanation. A quality answer should have a few sentences of explanation with mathematical reasoning.

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