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Income Tax Fundamentals 2020

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter7: Tax Credits

Section: Chapter Questions

Problem 7MCQ

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Problem 4
Suppose tax = 0%. Consider an EITC program in which the maximum credit is $4000. An individual who has earned
income between $10,000 and $15,000 receives the maximum credit (i.e.- someone who has earned income of $10,000 will
have total income of $14,000 because of the tax credit). An individual who has earned income of $19,000 has total
income of $19,250. What is the implicit tax rate that the individual who has earned income of $19,000 faces? (Express
your answer as a percentage. Don't enter a percentage sign. Round your final answer to four decimal places if necessary.
For example, if the tax rate is 99.9%, enter your answer as 99.9.)

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Suppose you earn $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket, which taxes at 5 percent, ranges from $0 to $30,000. The second tax bracket, which taxes at 25 percent, ranges from $30,001 to $120,000. How much will you pay in total taxes? Instructions: Enter your answer as a whole number. %24
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Consider a tax system where the first $40,000 of income is tax free, the next $40,000 is taxed at 10%, and all income above $80,000 is taxed at 20%. 1. Graph the total tax as a function of income. Be sure to label carefully. Тах Income 2. Graph the ATR(average) and MTR(marginal) rate. Label carefully. MTR, ATR 0.40 0.20 0.00 Income 3. Calculate the tax for individuals that earn: $20,000 Tax = ATR = %, MTR = $40,000 Tax = ATR = MTR = $60,000 Tax = ATR = MTR = $80,000 Tax = ATR = MTR = $100,000 Tax = ATR = MTR =
QUESTION 2 1. Consider the following version of the earned income tax credit (EITC). All persons who earn less than $20,000 are given a wage subsidy of $0.50 for each dollar worked. The maximum benefit is therefore $10,000. All persons who earn between $20,000 and $30,000 are paid the maximum benefit of $10,000. This is the income disregard region. The phaseout occurs in the income range from $30,000 to $50,000. In this range the maximum benefit $10,000 is cut by $0.50 for each dollar earned. For example, a person who earns $30,001 will get paid $10,000 -$0.50 = $9,999.50. At an income of $50,000 the program has been totally phased out. Now focus on a person initially working and earning $15,000 before the plan is introduced. Consider the net effect of this program (i.e, we are talking in this question about BOTH the income and substitution effects) for a person earning this amount. The program will: a. have no effect on time spent working b. cause time spent working to rise c. cause…
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With the following data, compute the NET FUTA Tax. Gross FUTA Tax DUE $ 6,750 Credit against FUTA (assume applicable) $3,100 Group of answer choices $3,100 $7,000 $3,650 $6,750
Scenario: You have just been hired by the country of "Shorelinia" to create a tax system. Your tax system must collect at least $1,000 billion in revenue. You have three taxes to choose from; income tax, sales tax, and payroll tax. a) Step 1.A.1. - Personal Income Tax rates You must decide personal income tax rates for 3 income groups: lower, middle, and upper income. (For each group you will choose the marginal tax rate. Your choices are 0%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, or 50%.) In the table below, you will find how much revenue you will collect from each income group. Income tax revenue (in billions of $) at various tax rates 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Lower $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Middle $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 Upper $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 The income tax rates will be: Lower (income under $40,000) =…
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You received $5,000 in interest revenue during the year. Your federal marginal tax rate was 26% and average tax rate was 20%. How much federal income taxes did you pay? Select one: a. $1,300 b. $1,650 c. $950 d. $1,450 e. $3,300
Based on the graph, answer the first three questions
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