March 30, 2017

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Averageville is considering levying a flat tax on its citizens.
To get an idea of the amount of revenue this tax
would raise, the city council instructed the city staff to
make a census of households to determine the “average”
household income. The city accountant claims that they
should use the median household income, rather than
the mean. What do you think? Explain.

  • math - ,

    Since the tax rate will be independent of income, the revenue received will be proportional to the mean income (not the median).

    The product of mean income, flat tax rate and number of households will equal the tax revenue (if everyone pays).

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