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Song earns $148,000 taxable income as an interior designer and is taxed at an average...

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Accounting

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Song earns $148,000 taxable income as an interior designer and is taxed at an average rate of 20 percent (.e., $29,600 of tax). Answer the questions below assuming that Congress increases the income tax rate such that Song's average tax rate increases from 20 percent to 25 percent. a. What will happen to the government's tax revenues if Song chooses to spend more time pursuing her other passions besides work in response to the tax rate change and therefore earns only $111,000 in taxable income? O Government's tax revenues would decrease by $1850 Government's tax revenues would increase by $1850 O Government's tax revenues would decrease by $2100 Government's tax revenues would increase by $2100 Government's tax revenues would remain unchanged hat is the term that describes this type of reaction to a tax rate increase? b. What is the term that describes this type of reaction to a tax rate increase? Substitution effect Endowment effect O Budget constraint O Income effect Price effect c. What types of taxpayers are likely to respond in this manner? Taxpayers with more disposable income Taxpayers with less disposable income

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