Question

In: Economics

Suppose in Fiscalville there is a 5 percent tax on the first $10,000 of income, but...

Suppose in Fiscalville there is a 5 percent tax on the first $10,000 of income, but a 15 percent tax on earnings between $10,000 and $20,000 and a 25 percent tax on income between $20,000 and $30,000. Any income above $30,000 is taxed at 35 percent.

Instructions: Round your answers to the nearest whole number.

a. If your income is $40,000, how much will you pay in taxes?

    

b. Determine your marginal tax rate.

    

c. Determine your average tax rate.

    

d. Is this a progressive tax?

      (Click to select)  No  Yes

Solutions

Expert Solution

Solution:-

Income = $40,000

(a) Calculate the Tax on Income:-

Tax Payable = (10,000 * 5%) + (20,000 – 10,000 * 15%) + (30,000 – 20,000 * 25%) + (40,000 – 30,000 * 35%)

                      = 500 + 1500 + 2500 + 3500

                      = 8000

(b) The marginal tax rate = 35%

(c) Calculate Average Tax Rate:-

Average Tax Rate = Total Tax Paid / Total Income

                                = $8000 / $40,000

                                = 20%

(d) Yes it is progressive tax.

Rahul Sunny answered 6 months ago
Next > < Previous

Related Solutions

Suppose in Fiscalville there is a 5 percent tax on the first $10,000 of income, but...
Suppose in Fiscalville there is a 5 percent tax on the first $10,000 of income, but a 15 percent tax on earnings between $10,000 and $20,000 and a 25 percent tax on income between $20,000 and $30,000. Any income above $30,000 is taxed at 35 percent. Instructions: Round your answers to the nearest whole number. a. If your income is $60,000, how much will you pay in taxes? b. Determine your marginal tax rate. c. Determine your average tax rate....
Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on...
Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on any income over $70,000. Family A earns $28,000 a year and Family B earns $65,000 a year. Both receive a ten percent raise. What is the marginal tax rate of each and what is the extra tax paid by each after the raise? A. Family...
QUESTION 40 Suppose the tax rate on the first $10,000 income is 0 percent; 10 percent...
QUESTION 40 Suppose the tax rate on the first $10,000 income is 0 percent; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $30,000; and 40 percent on any income over $80,000. Family A has income of $50,000. What is the marginal and average tax rate for Family A? marginal-10 percent; average-12 percent marginal-15 percent; average-25 percent marginal-25 percent; average-15 percent marginal-20 percent; average-12 percent
QUESTION 50 Suppose the income tax rate is 0 percent on the first $10,000; 10 percent...
QUESTION 50 Suppose the income tax rate is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on all income above $70,000. Family A has income of $100,000 while Family B has income of $40,000. The marginal tax rates faced by the two families are 30 percent on A and 30 percent on B. 40 percent on A and 10 percent on...
Suppose the government raises its revenue by a net tax of 20 percent on income, t...
Suppose the government raises its revenue by a net tax of 20 percent on income, t = 0.2, the marginal propensity to consume out of disposable income is 0.75, the marginal propensity to import is 0.06, and the government has an outstanding public debt of 800. In addition, the autonomous expenditure in households, business and foreign sectors (C + I + X - IM) is 340 and government expenditure is 340. Note: Keep as much precision as possible during your...
The tax system in Taxilvania includes a negative income tax. For all incomes below $10,000, individuals...
The tax system in Taxilvania includes a negative income tax. For all incomes below $10,000, individuals pay an income tax of -40% (that is, they receive a payment of 40% of their income). For any income above the $10,000 threshold, the tax rate on that additional income is 10%. For the scenario below, calculate the amount of income tax to be paid and after-tax income. Midram earns income of $40,000
Tatun Inc. pays state income tax at a 5% rate and federal income tax at a...
Tatun Inc. pays state income tax at a 5% rate and federal income tax at a 21% rate. Tatun recently engaged in a transaction in Mexico, which levied a $25,200 income tax on the transaction. Tatun's pretax net income for the current year is $1,913,900. Compute Tatun's total income tax burden assuming that: The Mexican tax is nondeductible for state and federal tax purposes. The Mexican tax is deductible for state and federal tax purposes.
a) Suppose that a provincial government collects income tax revenues using a linear income tax schedule....
a) Suppose that a provincial government collects income tax revenues using a linear income tax schedule. A taxpayer who has a zero income in a given year receives a $500 as a living allowance from the government. If a taxpayer who has an annual income of $30,000 pays $4000 in taxes, what is the marginal tax rate? Draw the linear income tax schedule on a diagram. Is the tax schedule regressive? Justify your answer. (2.5 marks) b) Using a simple...
Consider an economy with a real income of $10,000, consumption spending of $7,000, and net tax...
Consider an economy with a real income of $10,000, consumption spending of $7,000, and net tax revenue of $2,000. a. Calculate domestic private saving and Suppose government spending is $2,000. What is the public saving? b. Continuing from part last part, what is national saving? c Continuing from part b, suppose net foreign investment is -$3,000. What is private domestic investment spending?
Leona, whose marginal tax rate on ordinary income is 39.6 percent, owns 100 percent of the...
Leona, whose marginal tax rate on ordinary income is 39.6 percent, owns 100 percent of the stock of Henley Corporation. This year, Henley generates $1 million of taxable income. Use Appendix C and Corporate tax rate schedule. a.If Henley wants to pay all of its after-tax earnings to Leona as a dividend, calculate the amount of the dividend payment. b.Calculate Leona’s tax due on the dividend computed in part a, and her after-tax cashflow from the dividend receipt. c.Compute the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT