Compute the average tax rate paid by individuals at different levels of gross income X and at different ranks of X. Estimate this as the expected tax paid at X over X. What does this say about tax progressivity in Canada?

Answer

STEP 1: Use the DAD Application: DISTRIBUTION|NON PARAMETRIC REGRESSION

• After choosing the appropriate variable(s) and parameters, click on the  GRAPH button.

RESULTS

• Since the expected tax rate increases with gross income, the tax is progressive.