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Refer To The Accompanying Table For Waxwania:

Government Expenditures, G Tax Revenues, T Real GDP 180 110 550 180 130 650 180 150 750 180 170 850 180 190 950 a. What is the marginal tax rate in Waxwania? b. What is the average tax rate? c. Which of the following describes the tax system: proportional, progressive, regressive?
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a. The marginal tax rate is 20 percent. Marginal Tax Rate = _Tax Revenue/_ Real GDP. We apply this to every change in real GDP and find that it is the same for each incremental change of $100 (in a more general setting this does not need to be the case). b. The average tax rate is also 20 percent. Average Tax Rate = Tax Revenue/Real GDP. We apply this to every level of real GDP and find that it is the same for each level (in a more general setting this does not need to be the case). c. Since the average tax rate does not change as income (real GDP) increases, the tax system is proportional.
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