In Transylvania, the basic income tax system is fairly simple. The first 40,000 sylvers (the official currency of Transylvania) earned each year are free of income tax. Any additional income is taxed at a rate of 25%. In addition, every individual pays a social security tax, which is calculated as follows: all income up to 80,000 sylvers is taxed at an additional 20%, but there is no additional social security tax on income above 80,000 sylvers. a. Calculate the marginal tax rates (including income tax and social security tax) for Transylvanians with the following levels of income: 20,001 sylvers, 40,001 sylvers, and 80,001 sylvers. on 20,001 sylvers: 20 % 21 on 40,001 sylvers: % Incorrect 22.5 on 80,001 sylvers: % Incorrect b. The Transylvanian income tax is progressive and the social security tax is regressive c. Which income group's incentives are most adversely affected by the combined income and social security tax systems?
