Question

In: Economics

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

Solutions

Expert Solution

Amount of income tax = [(-40%)*(10,000)] + [(10%)*(40,000 - 10,000)] = -4,000 + 3,000 = -1,000
The amount of income tax to be paid = -1,000
That is he gets $1,000

After tax income = 40,000 + 1,000 = $41,000


Related Solutions

Consider 3 individuals with incomes equal to 10,000, 20,000 and 30,000 euros. a) They face an...
Consider 3 individuals with incomes equal to 10,000, 20,000 and 30,000 euros. a) They face an income tax rate equal to 10%. Compute the Gini coefficients for the income distribution before taxes and the income distribution after taxes. b) Assume that a deduction from the tax base (taxable income) of 4,000 euros is introduced. Compute after tax incomes and the corresponding Gini coefficient. c) Suppose that instead a proportional tax rate we have an income tax with increasing marginal rate...
The table below indicates the incomes of 20 individuals in the Nkoranza district in Ghana. 1700...
The table below indicates the incomes of 20 individuals in the Nkoranza district in Ghana. 1700 710 220 80 470 200 370 50 1150 120 400 1300 310 590 180 430 1450 280 330 510 Use the data in the table to estimate the Kuznets ratios from both the Quintiles and Deciles. Explain the meaning of the Kuznets ratios estimated and comment on them.
Current liabilities includes all of the following except ​income tax payable. ​mortgage due to be paid...
Current liabilities includes all of the following except ​income tax payable. ​mortgage due to be paid this year. ​notes receivable. ​advance payments from customers.
What is a negative income tax? What is the purpose of it?
What is a negative income tax? What is the purpose of it?
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 $200,000 of taxable income. How much income tax does he pay? Group of answer choices A.80,000 B.45,000 C.60,000 D.25,000
What is a progressive income tax system and how can an income tax system be structured...
What is a progressive income tax system and how can an income tax system be structured so that it is progressive?
A sample of 11 individuals shows the following monthly incomes. Individual Income ($)   1   1,500   2...
A sample of 11 individuals shows the following monthly incomes. Individual Income ($)   1   1,500   2   2,000   3   2,500   4   4,000   5   4,000   6   2,500   7   2,000   8   4,000   9   3,500 10   3,000 11 43,000 a. What would be a representative measure of central location for the above data? Explain. b. Determine the mode. c. Determine the median. d. Determine the 60th percentile. e. Drop the income of individual number 11 and compute the standard deviation for the first 10...
Canadian Tax System (2.5 marks) Compare the Canadian income tax system with another nation’s tax system....
Canadian Tax System (2.5 marks) Compare the Canadian income tax system with another nation’s tax system. Examine and describe current tax laws, concepts or calculations of a nation of your choice and discuss the similarities and differences with Canada’s tax system like: Individual marginal tax rates and tax brackets Individual deductions and credits Corporate or business taxation answer should be approximately 1-3 pages and contribute to future tax planning for international financial service clients. Also, include any references or cite...
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...
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....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT