### Chapter 5 Review Exercises

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• 1. Massachusetts State Income Tax

Massachusetts has a flat income tax with a rate of 5.3%. Determine how much state income tax the person owes.

A person who lives in Massachusetts has a taxable income of \$45,000.

• Worked-Out Solution

The income tax for the person is

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``` _    _     ______  __    __     ___      ______
| |  | ||  /_   _// \ \\ / //   / _ \\   /_   _//
| |/\| ||   -| ||-   \ \/ //   / //\ \\    | ||
|  /\  ||   _| ||_    \  //   |  ___  ||  _| ||
|_// \_||  /_____//    \//    |_||  |_|| /__//
`-`   `-`  `-----`      `     `-`   `-`  `--`

```
• 2. Massachusetts State Income Tax

Massachusetts has a flat income tax with a rate of 5.3%. Determine how much state income tax the person owes.

A person who lives in Massachusetts has a taxable income of \$1,000,000.

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``` __   _      ___     __   _    _    _   __    __
| || | ||   / _ \\  | || | || | || | || \ \\ / //
| '--' ||  | / \ || | '--' || | || | ||  \ \/ //
| .--. ||  | \_/ || | .--. || | \\_/ ||   \  //
|_|| |_||   \___//  |_|| |_||  \____//     \//
`-`  `-`    `---`   `-`  `-`    `---`       `

```
• 3. Massachusetts State and Local Taxes

The income for a family in the middle 20% is \$53,000. How much, in dollars, does this family pay for each type of tax?

• Worked-Out Solution
 Sales & excise taxes: Property taxes: Income taxes:

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```  ______    _____     ______   __   __   _____
/_____//  |  ___||  /_____//  \ \\/ // |  __ \\
`____ `   | ||__    `____ `    \ ` //  | |  \ ||
/___//    | ||__    /___//      | ||   | |__/ ||
`__ `     |_____||  `__ `       |_||   |_____//
/_//      `-----`   /_//        `-`'    -----`
`-`                 `-`
```
• 4. Massachusetts State and Local Taxes

The income for a family in the top 1% is \$2,600,000. How much, in dollars, does this family pay for each type of tax?

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```  ______    _____     _  __    ______  __    __
/_   _//  |  ___||  | |/ //  /_   _// \ \\ / //
| ||    | ||__    | ' //    -| ||-   \ \/ //
_| ||    | ||__    | . \\    _| ||_    \  //
/__//     |_____||  |_|\_\\  /_____//    \//
`--`      `-----`   `-` --`  `-----`      `

```
• 5. Massachusetts State and Local Taxes

Determine whether the three types of taxes are regressive, flat, or progressive in Massachusetts.

• Worked-Out Solution
• Sales & excise taxes are regressive because people in higher income brackets pay a lower rate.
• Property taxes are also regressive because people in higher income brackets pay a lower rate.
• Income taxes are progressive because people in higher income brackets pay a higher rate. Although Massachusetts has a flat tax rate of 5.3% (see Exercise 1), the deductions allowed by the state end up making the income tax progressive.

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```  ______    _____     _____     _____     _____
/_   _//  |  ___||  |__  //   |  ___||  |__  //
| ||    | ||__      / //    | ||__      / //
_| ||    | ||__     / //__   | ||__     / //__
/__//     |_____||  /_____||  |_____||  /_____||
`--`      `-----`   `-----`   `-----`   `-----`

```
• 6. Massachusetts Taxes

Are taxes, as a whole, regressive, flat, or progressive in Massachusetts? Explain your reasoning.

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``` __   _      ___      _  __   __   __    _____
| || | ||   / _ \\   | |/ //  \ \\/ //  |__  //
| '--' ||  / //\ \\  | ' //    \ ` //     / //
| .--. || |  ___  || | . \\     | ||     / //__
|_|| |_|| |_||  |_|| |_|\_\\    |_||    /_____||
`-`  `-`  `-`   `-`  `-` --`    `-`'    `-----`

```
• 7. Alcohol Sales Tax

Massachusetts had a 6.25% sales tax on alcohol from August 2009 to December 2010. Part of the revenue from the tax was used to fund substance abuse programs. This tax was abolished in December, 2010. Do you agree with such a tax? Why or why not.

• Worked-Out Solution

This was a controversial tax. Although it was successful in raising money for the state, it was unpopular and was easily defeated when it came up for abolishment on a state-wide ballot.

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```  _____     _____    __   __     ___     _    _
/  ___||  |  ___||  \ \\/ //   / _ \\  | \  / ||
| // __    | ||__     \   //   / //\ \\ |  \/  ||
| \\_\ ||  | ||__     / . \\  |  ___  ||| .  . ||
\____//   |_____||  /_//\_\\ |_||  |_|||_|\/|_||
`---`    `-----`   `-`  --` `-`   `-` `-`  `-`

```
• 8. Effects of a Tax

Suppose the revenue from a sales tax on cigarettes is used to offset the costs of a new health insurance law. Discuss ways in which the tax might help the people who are paying the tax.

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```  ______     ___      _  __     ___