PLEASE HELP

[ariel123]

Suppose that the government has been taxing each person’s income at a marginal rate of 25% for every dollar in excess of $72,000 with the first $72,000 earned not taxed. In addition, the government imposes a lump-sum surcharge of $4,000 on every person who earns $120,000 or more.

a. Write out and graph the income tax, t, as a function of income before tax, x.

b. Write out and graph the income after tax, y, as a function of income before tax, x.

c. Check for continuity for this function when x = $60,000, $72,000, $100,000 and
$120,000.

d. Discuss any incentive effects on hours worked that may arise due to each identified discontinuity in the tax schedule.

 

[Harry_the_cat]

Where are you stuck?

 

[HallsofIvy]

Suppose that the government has been taxing each person’s income at a marginal rate of 25% for every dollar in excess of $72,000 with the first $72,000 earned not taxed. In addition, the government imposes a lump-sum surcharge of $4,000 on every person who earns $120,000 or more.

Do you see that if a person's income is less than $72,000 then they pay NO tax? Suppose a person's income, x, is greater than $72,000 but less than $120,000. How much of that is "greater than $72,000"? So what is 25% of that? And what if the x is greater than $120,000?

 

[Steven G]

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