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Social Science Clinic => Economics => Macroeconomics => Topic started by: booty5 on Nov 23, 2022

Title: Arguments for RedistributionThe table shows the distribution of money income, the income tax rate, ...
Post by: booty5 on Nov 23, 2022

Arguments for Redistribution

The table shows the distribution of money income, the income tax rate, and the benefits the government provides to each quintile in Fairland.

Households	Income (millions of dollars per year)	Income tax rate	Benefits (millions of dollars per year)
Lowest quintile	4​	0	11​
Second quintile	14​	10%	8​
Third quintile	20​	18%	1​
Fourth quintile	23​	28%	0
Highest quintile	35​	39%	0

After government taxes and redistribution, what is the percentage of total income for the second quintile? For the highest quintile?
Please round your final answer to two decimal places.
◦ 14.58%, 36.46%
◦ 25.20%, 14.92%
◦ 25.20%, 36.46%
◦ 14.58%, 14.92%

Title: Arguments for RedistributionThe table shows the distribution of money income, the income tax rate, ...
Post by: labrinker on Nov 23, 2022

25.20%, 14.92%

First, determine the taxes paid by each quintile and the income after taxes and benefits.

Households	Income (millions of dollars per year)	Taxes paid	Income after taxes and benefits
Lowest quintile	4​	4*0 = 0	4-0+11 =15
Second quintile	14​	14*.1 = 1.40	14-1.40+8 = 20.6

Third quintile

20​

20*.18 = 3.60

20-3.60+1 = 17.4

Fourth quintile

23​

23*.28 = 6.44

23-6.44+0 = 16.56

Highest quintile

35​

35*.39 = 13.65

35-13.65+0 = 12.2

Then, determine the total income after taxes and benefits = 15 + 20.6 + 17.4 + 16.56 + 12.2 = 81.76.

The percentage of total income for a quintile = 100*income after taxes and benefits for that quintile/total income after taxes and benefits.
For the second quintile, percentage of total income = 100*20.6/81.76 = 25.20%.
For the highest quintile, percentage of total income = 100*12.2/81.76 = 14.92%