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. d. Is this a progressive tax?

Expert Solution

Solution:-

Taxable income = $ 60,000

(a). Income tax owed = (5% * 10,000) + (15% * $20,000 – 10,000) + (25% * 30,000 – 20,000) + (35% * (30,000 – 60,000)

= 500 + 1500 + 2500 + 10500

= $15,000

(b). Marginal tax rate = 35%.

(c). Average tax rate = income tax owed/taxable income x 100

= 15,000/ 60000

= 25%

(d). Yes, this is a progressive tax since the higher the income, the greater the tax rate.

Rahul Sunny answered 6 months ago

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

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