In his letter accepting the resignation, the monarch praised Mulki for his "bravery in taking hard decisions that do not gain popularity" and asked him to stay on in a caretaker role until the new government is formed.
Mr Mohammed, along with dozens of taxi drivers, shop owners, waiters, vendors and others - who normally have peak business at night during Ramadan - say demand is so low in the kingdom this year due to the economic situation that they would rather protest than accumulate losses.
Jordan's professional associations, which took the lead in public action by holding a general strike last week, said a second planned general strike on Wednesday would proceed as planned unless the income tax law was withdrawn.
Asma Khader, a former minister and a leading human rights lawyer, told Arab News she was confident that Al-Razzaz would be more responsive to the public.
The demonstrators who gathered near the cabinet office chanted slogans: "We are here until we bring the downfall of the bill..."
The senate convened hours after protests ended Sunday to discuss "ways of dealing with draft law.in the interest of all parties", Jordan's official Petra news agency said.
According to the recent official estimates collected, 20 percent of Jordanians are on the verge of poverty while 18.5 percent of the population remains.
Mulki imposed steep IMF-mandated tax hikes early this year to cut rising public debt.
Hani Mulki's reported resignation comes after the largest anti-government protests seen in Jordan since 2011. His appointment nevertheless sends a positive message to foreign donors that Jordan will press ahead with reforms, though in a gradual way, they said.
They were the latest measures in a series of economic reforms since Amman secured a $723 million three-year credit line from the International Monetary Fund in 2016.
Jordan has backed down on reforms in the past, fearing a social backlash.
King Abdullah, appeared to back Mulki, was quoted by state media as saying both parliament and government should engage in a "national" dialogue to reach a compromise over the bill.
The government says it needs more funds for public services and argues that tax changes reduce social inequalities by placing a heavier load on high earners nearly exclusively. They grew on Saturday (June 2) when Prime Minister Hani Mulki refused to scrap a bill that would hike taxes.
Mulki, a business-friendly politician, was appointed in May 2016 and given the responsibility of reviving a sluggish economy and business sentiment.
Many Jordanians, including the middle class, feel they are being squeezed financially by a government they perceive as corrupt and say they are not getting services for the taxes they are asked to pay.
But the country has long played host to refugees from neighbouring Iraq, and according to government figures, more than one million people have fled to Jordan from Syria's devastating seven-year war, further straining its struggling economy.