Question

Suppose a state has the following individual income tax structure.The first $20,000 that an individual earns is taxed at 5%. The next $30,000 is taxed at 10%. Any income exceeding $50,000 is taxed at 20%.Based on this tax structure, if a person’s income is equal to $60,000, his average tax rate is equal to:

Answer 1

Answer: $6,000

Explanation: Considering the tax structure:

An employee with a total income of $60,000 will pay:

1st $20,000= $20,000*5%=$1,000

2nd $30,000= $30,000*10% = $3,000

Bal of $10,000= $10,000 * 20% = $2,000

Total Tax payable = $1,000+$3,000+ $2,000=$6,000