Are there concerns about equity with the policy

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A new income tax policy has been proposed in the legislature. The policy would require individuals with incomes of $15,000 or less to pay no tax and for those with incomes above $15,000 to a pay a tax of 10% only on the part of their income that exceeds $15,000. Members of the legislature are unsure of the impact that the proposed policy would have and have asked the Fiscal Research Division to investigate. The task has been assigned to you. You report directly to the direct of the division. Your analysis of the tax should address the following questions: 1. Could an individual pay an average tax rate of 7.5% under this system? 2. Could an individual pay an average tax rate of 10% under this system? 3. What average and marginal tax rates would individuals with these income levels face: $10,000, $20,000, $40,000, and $150,000? 4. Are there concerns about equity with the policy?

Reference no: EM131088440

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