Question

Suppose in fiscalville there is a 0 percent tax on the first $10,000 of income, but a 15 percent tax on earnings between $10,000 and $20,000 and a 30 percent tax on income between $20,000 and $30,000. any income above $30,000 is taxed at 45 percent. instructions: round your answers to the nearest whole number.
a. if your income is $50,000, how much will you pay in taxes?

Answer 1

Answer:

A.$ 13,500

B.45%

C.18%

Explanation:

a)

Tax on $ 50,000 = 0 + 0.15 x ( $ 20,000 - $ 10,000 ) + 0.30 x ( $ 30,000 - $ 20,000) + 0.45 x ( $ 50,000 - $ 30,000)

Tax payable = 0 + $ 1,500 + $ 3,000 + $ 9,000

Tax payable = $ 13,500

b) The marginal tax rate can be seen as the extra taxes which is been paid on an additional dollar of income

The marginal tax rate = 45%

c)

Average tax rate = Total taxes paid \div Total income

Average tax rate = $ 9,000 \$50,000

=0.18×100

Average tax rate = 18%