Question

Ms. Benoit is a self-employed architect who earns $300,000 annual taxable income. For the past several years, her tax rate on this income has been 35 percent. Because of recent tax law changes, Ms. Benoit’s tax rate for next year will decrease to 25 percent. Required: Based on a static forecast, how much less revenue will the government collect from Ms. Benoit next year? How much less revenue will the government collect from Ms. Benoit next year if she responds to the rate decrease by working more hours and earning $375,000 taxable income? How much less revenue will the government collect from Ms. Benoit next year if she responds to the rate decrease by working fewer hours and earning only $275,000 taxable income?

Answer 1

Answer:

Less revenue the government collect = $30,000

Less revenue the government collect = $11,250

Less revenue the government collect = $36,250

Explanation:

A.Present revenue collection = $300,000 x 35%

Present revenue collection = $105,000

Forecast present revenue collection = $300,000 x 25%

Forecast present revenue collection = $75,000

Less revenue the government collect = $105,000 - $75,000

Less revenue the government collect = $30,000

B.New revenue collection = $375,000 x 25%

New revenue collection = $ 93,750

Less revenue the government collect = $105,000 - $93,750

Less revenue the government collect = $11,250

C.New revenue collection = $275,000 x 25%

New revenue collection = $ 68,750

Less revenue the government collect = $105,000 - $68,750

Less revenue the government collect = $36,250