Consider two tax systems. Tax system A has a tax rate of 5% on the first $20,000 of taxable income, then 20% on the next $30,000, then 50% on all taxable income above $50,000. Tax system A has a standard deduction of $5,000. Tax system B has a flat tax rate of 30% on all taxable income and a standard deduction of $10,000. Consider 2 individuals, the first with income of $51,000 and the second with income of $56,000.  (a) Calculate the average and the marginal tax rates of both individuals under both tax systems.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Consider two tax systems. Tax system A has a tax rate of 5% on the first $20,000 of taxable income, then 20% on the next $30,000, then 50% on all taxable income above $50,000. Tax system A has a standard deduction of $5,000. Tax system B has a flat tax rate of 30% on all taxable income and a standard deduction of $10,000. Consider 2 individuals, the first with income of $51,000 and the second with income of $56,000. 

(a) Calculate the average and the marginal tax rates of both individuals under both tax systems.



Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Unemployment Taxes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education