Suppose Maryland establishes an income tax schedule that has a tax rate of 10% on the first $20,000 of income, then 25% on the next $30,000, and…

1.    Suppose Maryland establishes an income tax schedule that has a tax rate of 10% on the first $20,000 of income, then 25% on the next $30,000, and then 40% on all taxable income above $50,000. Maryland also provides a $4,000 tax deduction per family member.

a.    For each of the following households, calculate:

·     Taxable income

·     Total taxes paid

·     Marginal tax rate

·     Average tax rate

i.     The Barksdale family has two members (Avon and DeAngelo) and earns $52,000 per year.

ii.    The Pearson family has four members (Felicia and her three children) and earns $70,000 per year.

b.    Suppose Maryland decides to replace the $4,000 deduction per family member with a $4,000 per member tax credit. How will this affect the taxes paid by each family?

c.    Suppose Maryland decides to move to a flat tax of 25%, keeping the $4,000 per family member deduction in place. What does each family pay in taxes under the flat tax? Does this change make the system more progressive, more regressive, or neither?

d.    Bonus question: The characters described in this question are taken from one of the best TV shows of all time. What is it?

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