Question
In: Economics
QUESTION 50 Suppose the income tax rate is 0 percent on the first $10,000; 10 percent...
QUESTION 50
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Suppose the income tax rate is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on all income above $70,000. Family A has income of $100,000 while Family B has income of $40,000. The marginal tax rates faced by the two families are
30 percent on A and 30 percent on B.
40 percent on A and 10 percent on B.
40 percent on A and 20 percent on B.
30 percent on A and 20 percent on B.
Solutions
Expert Solution
Suppose the income tax rate is 0 percent on the first $10,000;
10 percent on the next $20,000; 20 percent on the next $20,000; 30
percent on the next $20,000; and 40 percent on all income above
$70,000. Family A has income of $100,000 while Family B has income
of $40,000. The marginal tax rates faced by the two families
are
Family A’s income = 100,000 = 10,000 (Slab 1) + 20,000(Slab
2)+20,000 (S3) +20,000 (S4) + 30,000 (S5)
One additional dollar of income will lie in the 4th slab. So
marginal tax rate is 40%
Family B’s income = 100,000 = 10,000 (Slab 1) + 20,000(Slab
2)+10,000 (S3)
One additional dollar of income will lie in the 3rd slab. So
marginal tax rate is 20%
Rahul Sunny answered 2 years agoRelated Solutions
QUESTION 40 Suppose the tax rate on the first $10,000 income is 0 percent; 10 percent...
QUESTION 40
Suppose the tax rate on the first $10,000 income is 0 percent;
10 percent on the next $20,000; 20 percent on the next $20,000; 30
percent on the next $30,000; and 40 percent on any income over
$80,000. Family A has income of $50,000. What is the marginal and
average tax rate for Family A?
marginal-10 percent; average-12 percent
marginal-15 percent; average-25 percent
marginal-25 percent; average-15 percent
marginal-20 percent; average-12 percent
Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on...
Suppose the income tax rate schedule is 0 percent on the first
$10,000; 10 percent on the next $20,000; 20 percent on the next
$20,000; 30 percent on the next $20,000; and 40 percent on any
income over $70,000. Family A earns $28,000 a year and Family B
earns $65,000 a year. Both receive a ten percent raise. What is the
marginal tax rate of each and what is the extra tax paid by each
after the raise?
A. Family...
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....
TAXABLE INCOME TAX RATE $ 0----------------- $8,700 10% $ 8,700 -----------
TAXABLE INCOME
TAX RATE
$
0-----------------
$8,700
10%
$ 8,700
-----------
$
35,350
15%
$35,350-----------
$85,650
25%
$85,650------------
$178,650
28%
$178,650------------
$388,350
33%
OVER------------------
$388,350
35%
Use the Marginal Income Tax Rate above to compute the
following:
Tax Due on Taxable Income of $50,000; $200,000; and
$500,000.
Average Tax Rate (ATR) on Taxable Income of $50,000; $200,000;
$500,000.
Marginal Tax rate Earnings/Income Tax owed 10% $0 to $9,525 10% of income 12% $9,526 to...
Marginal Tax rate
Earnings/Income
Tax owed
10%
$0 to $9,525
10% of income
12%
$9,526 to $38,700
$952.50 plus 12% of the amount over $9,525
22%
$38,701 to $82,500
$4,453.50 plus 22% of the amount over $38,700
24%
$82,501 to $157,500
$14,089.50 plus 24% of the amount over $82,500
32%
$157,501 to $200,000
$32,089.50 plus 32% of the amount over $157,500
35%
$200,001 to $500,000
$45,689.50 plus 35% of the amount over $200,000
37%
$500,001 or more
$150,689.50 plus 37%...
Suppose tax payers are required to pay a base of $50 plus 50 percent on any...
Suppose tax payers are required to pay a base of $50 plus 50
percent on any income over $200. Suppose further that the taxing
authority wishes to raise taxes by $30 for incomes of $300.
a) Before the tax change, how much tax in paid by someone making
$500?
b) If the base tax of $50 is to remain unchanged, what will the
new marginal tax rate have to be?
Suppose the corporate tax rate is 40%, investors pay a tax rate of 20% on income...
Suppose the corporate tax rate is 40%, investors pay a tax rate
of 20% on income from dividends or capital gains and a tax rate of
30% on interest income.
Rally, Inc., currently an all-equity
firm, is considering adding permanentdebt through a levered
recapitalization (Rally plans to raise 300 million through debt and
payout the proceeds to shareholders). Interest Rally will be paying
each year is expected to be $15 million. Rally will pay this
interest expense by cutting its...
Suppose the corporate tax rate is 40%, investors pay a tax rate of 20% on income...
Suppose the corporate tax rate is 40%, investors pay a tax rate
of 20% on income from dividends or capital gains and a tax rate of
30% on interest income.
Rally, Inc., currently an all-equity firm, is considering adding
permanent debt through a levered recapitalization (Rally plans to
raise 300 million through debt and payout the proceeds to
shareholders). Interest Rally will be paying each year is expected
to be $15 million. Rally will pay this interest expense by cutting...
Suppose the corporate tax rate is 40%, investors pay a tax rate of 20% on income...
Suppose the corporate tax rate is 40%, investors pay a tax rate
of 20% on income from dividends or capital gains and a tax rate of
30% on interest income.
Rally, Inc., currently an all-equity
firm, is considering adding permanent debt through a levered
recapitalization (Rally plans to raise 300 million through debt and
payout the proceeds to shareholders). Interest Rally will be paying
each year is expected to be $15 million. Rally will pay this
interest expense by cutting...
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