EFFECTIVE TAX RATE Discretionary income is the income people have left over after paying for...
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Accounting
EFFECTIVE TAX RATE
Discretionary income is the income people have left over after paying for necessities like rent, food, transportation, etc. The cost of basic expenses does increase with income, since housing and car costs are higher, however usually not proportionally.
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For each income group, estimate their essential expenses, and calculate their discretionary income.
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Then compute the effective tax rate for each plan relative to discretionary income rather than income.
| GROUP | Income per household | Discretionary Income (estimated) | Effective rate, flat | Effective rate, modified | Effective rate, progressive |
| A | $12,000 | ||||
| B | $29,000 | ||||
| C | $50,000 | ||||
| D | $79,000 | ||||
| E | $129,000 | ||||
| F | $295,000 |
CONCLUSION
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Which plan seems the fairest to you? Why?
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Which plan seems the least fair? Why
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