2) Assume that the Social Security tax rate is 6% and the Social Security maximum is...

2) Assume that the Social Security tax rate is 6% and the Social Security maximum is $140,000 per year.

A) What is the effective tax rate on someone with a $70,000 salary?

$4200

B) What is the effective tax rate on someone with a $140,000 salary?

$8400

C) What is the effective tax rate on someone with a $1,400,000 salary?

Solutions

Expert Solution

A) Social Security amount = 70000 * 6%

= 4200

Effective rate = 6 %

B) Social Security amount = 140000 * 6%

= 8400

Effective rate = 6 %

C) Social Security amount = 140,000 * 6% ( Because maximum amount is $ 140,000 )

= 8400

Effective rate = 8400 / 1400,000

= 0.60% Answer

jeff jeffy answered 1 year ago

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