Question

Sam has taxable income of $350,000 dollars. Sam's nephew Adam has taxable income of $3,500. What federal income tax rate applies to the first taxable dollar of Sam's taxable income and what tax rate applies to the first taxable dollar of Adam's taxable income?a. 0% and 0%.b. 0% and 10%.c. 10% and 10%.d. 10% and 39.6%.

Answer 1

Answer:

c. 10% and 10%

Explanation:

The income tax rate are progressive, this means the rates applies for the amount above the top of the previous bracket

Sam will be taxes with a higher rate in the subsequent dollars and end up with the 39.6% tax for their last part of income

But, as state beore the tax is progressive not all gains are taxes wit hthe same tax-rate

Also is important to notice this makes both making equal contribution when they are equal (below a certain threshold) and then, being treated unequally when their income are different