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Question

Merrick earns $122,000 taxable income as a landscape designer and is taxed at an average rate of 20 percent (i.e., $24,400 of tax). Answer the questions below assuming that Congress increases the income tax rate such that Merrick's average tax rate increases from 20 percent to 25 percent. a. What will happen to the government's tax revenues if Merrick chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $91,500 in taxable income? Multiple Choice 1: Government's tax revenues would decrease by $1,525 Government's tax revenues would increase by $1,525 Government's tax revenues would decrease by $1,775 Government's tax revenues would increase by $1,775 Government's tax revenues would remain unchanged

          Merrick earns $122,000 taxable income as a landscape designer and is taxed at an average rate of 20 percent (i.e., $24,400 of tax). Answer the questions below assuming that Congress increases the income tax rate such that Merrick's average tax rate increases from 20 percent to 25 percent.

a. What will happen to the government's tax revenues if Merrick chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $91,500 in taxable income?

Multiple Choice 1:
Government's tax revenues would decrease by $1,525
Government's tax revenues would increase by $1,525
Government's tax revenues would decrease by $1,775
Government's tax revenues would increase by $1,775
Government's tax revenues would remain unchanged

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