Suppose a country has a progressive income tax system that uses the tax table below. Taxable...

Suppose a country has a progressive income tax system that uses the tax table below.

Taxable Income
From	To	% Tax
0	50,000	10%
50,001	100,000	20%
101,000	200,000	30%
Over 200,000		40%

Assume Joe earns $200,000 of taxable income. How much income tax does he pay?

Group of answer choices

A.80,000

B.45,000

C.60,000

D.25,000

Solutions

Expert Solution

Till income 50,000 he will pay 10%. So, for first 50,000 he will pay tax = 10% of 50,000 = (10/100)*50,000 = 5000

From 50,001 to 100,000 he will pay 20%. So for next 50,000 of his income he will pay tax = 20% of 50,000 = (20/100)*50,000 = 10,000.

Now remaining taxable income is 200,000 - 100,000 = 100,000. From 100,001 to 200,000 he will pay 30%. So for next 100,000 of his income he will pay tax = 30% of 100,000 = (30/100)*100,000 = 30,000.

So Amount of tax he will pay in total = 5,000 + 10,000 + 30,000 = 45,000

Hence, the correct answer is (B) 45,000.

Rahul Sunny answered 1 year ago

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