Question

During​ 2015, the Smiths and the Jones both filed joint tax returns. For the tax year ended December​ 31, 2015, the​ Smiths' taxable income was $112,000, and the Jones had total taxable income of $56,000.

a. Using the federal tax rates given in Table​ 1.2, ​, for married couples filing joint​ returns, calculate the taxes for both the Smiths and the Jones.

The taxes for the Smiths is $___?

The taxes for the Jones is $___?

b. Calculate and compare the ratio of the​ Smiths' to the​ Jones' taxable income and the ratio of the​ Smiths' to the​ Jones' taxes. What does this demonstrate about the federal income tax​ structure?

The ratio of the Smiths' to the Jones' taxable income is ___? (Round to two decimal places.)

The ratio of the Smiths' to the Jones' taxes is ___? (Round to two decimal places.)

c. What does this demonstrate about the federal income tax structure?

A. Those who earn higher incomes pay a higher proportion of their income in taxes.

B. Those who earn lower incomes pay a higher proportion of their income in taxes.

C. Those who earn higher incomes pay a lower proportion of their income in taxes.

D. Everyone pays the same proportion of their income in taxes.

    Taxable Income
Tax Rates   Joint Returns
10%   $0 to $18,150
15%   $18,151 to $73,800
25%   $73,801 to $148,850
28%   $148,851 to $226,850
33%   $226,851to $405,100
35%   $405,101 to $457,600
39.6%   Over $457,600

Answer 1

Given,
	Smiths Taxable income	$112,000
	Jones Taxable income	$56,000
a	For smiths,
	Tax calculation
	18150 x 10%	1,815.00
	(73800-18150)=55650 x 15%	8,347.50
	(112000-73800) = 38200 x 25%	9550.00
	Total Tax	$ 19712.5
	For Jones,
	Tax calculation
	18150 x 10%	1,815.00
	(56000-18150) = 37850 x 15%	5677.5
	Total Tax	$    7,492.5

b. The ratio of the​ Smiths' to the​ Jones' taxable income is 2:1 Round to two decimal​ places.)

The ratio of the​ Smiths' to the​ Jones' taxes is 2.63:1 (Round to two decimal​ places.)

Explanation:

Ratio of incomes = $112,000 / $56,000 i.e. 2:1

Ratio of taxes = $19,712.5 / $7,492.5 i.e. $ 2.63:1

c.What does this demonstrate about the federal income tax​structure? 

A.Those who earn higher incomes pay a higher proportion of their income in taxes.

Explanation: The Smiths income is twice the income that of Jones but they have to pay the tax in a higher ratio. This indicates that the tax liability also increases with the increased income in higher proportion.