1. Taxes and Fiscal Policy
Tax Calculations

2. Taxes
Suppose your total taxable income this year is $75,000. You are taxed at a rate of 10% on the first $25,000, 20% on the next $25,000, and 30% on the final $25,000. What is your total income tax? What type of tax is this?
The total income tax would be $15,000. This is a progressive tax. (Income Tax is an example)

3. Taxes
The sales tax on a $20.00 hammer is 7%, or $1.40. Why is this tax a bigger burden for Josh, who has a $15,000 income, than for Aaron, who has a $150,000 income? What type of tax is this?
Because the tax takes a higher percentage from Josh’s total income than from Aarons. This is an example of a regressive tax.

4. Taxes
Ann earns $10,000 annually and pays a tax of $1,000. Jerome earns $60,000 during the same period and pays taxes of $6,000. What type of tax did they both pay? Why?
Proportional, because they both paid the same percentage (10%) on the total income. Property tax is an example of proportional taxes.