Question

Jurisdiction X levies a flat 14 percent tax on individual income in excess of $35,000 per year. Individuals who earn $35,000 or less pay no income tax.
a. Mr. Hill earned $89, 800 income this year. Compute his income tax and determine his average and marginal tax rate.
b. Ms. Lui earned $42, 500 income this year. Compute her income tax and determine her average and marginal tax rate.
c. Ms. Archer earned $31, 000 income this year and paid no income tax. Describe her average and marginal tax rate.
d. What type of rate structure does Jurisdiction X use for its individual income tax?

Answer 1

Answer:

a) tax income 7,672

  8.54%

b) tax income 1,050

 2.47%

c) zero

d) proportional

Explanation:

a ) 89,800 gross income - 35,000 exemption= 54,800 taxable income

54,800 x 14% = 7,672

7,672/89,800 = 0.085434298 average rate

b) 42,500 - 35,000 = 7,500

7,500 x 14% =  1,050

0.024705882

c) 0

d) proportional as it is neither, progressive(tax increase against bigger income) or regressive (tax decrease against bigger income)