Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 28.1, Problem 3ST
To determine
Related to individual income.
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Keep in mind that you don’t have to die to have to pay inheritance and gift taxes under the current tax code. Anyone who gives a family member more than $11.5 million (as of 2020 indexed annually for inflation) is subject to the tax. Is that amount too high or too low, and why?
Calculate Social Security taxes, Medicare taxes, and FIT for Jordon Barrett. He earns a monthly salary of $11,900. He is single. Before
this payroll, Barrett's cumulative earnings were $142,100. (Social Security maximum is 6.2% on $142,800 and Medicare is 1.45%.)
Calculate FIT by the percentage method. (Use Table 9.1)
Note: Round your answers to 2 decimal places.
FIT
Social Security taxes
$
737.80
Medicare taxes
$
172.55
Suppose you borrow $1,000 from a bank at a fixed rate of interest (5%) for one year to finance your college education. Explain the redistribution of income that occurs if the rate of inflation that year is 7%. Was this loan advantageous to you or the bank?
Chapter 28 Solutions
Economics (MindTap Course List)
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- What is the difference between in-kind and cash transfers? Winch might increase the utility of the recipients the most? Why is there political resistance to the negative income tax?arrow_forwardWhat is your opinion on the idea that a persons income and wealth in American society today is ultimately determined by their own individual attitude and effort?arrow_forwardSuppose Sam has a total taxable income of $40,000, and he must pay $3,600 in taxes for clothing purchased this year. Teresa has a total taxable income of $60,000. The average tax rate for Sam is %. Based on Teresa's taxable income and the average tax rate you found for Sam in the prior question, calculate the minimum amount of tax Teresa must pay to achieve each tax structure listed in the following table. Type of Tax Structure Progressive Proportional Regressive Tax Needed to Achieve Tax Structure (Dollars)arrow_forward
- When the income tax was first proposed in 1894, it was ruled unconstitutional? True or falsearrow_forwardThe FICA tax is levied on employers, employees, and certain self-employed individuals. Revenue goes to Social Security and Medicare. In 2014, the employee's contribution to the retirement part of the FICA tax was 6.2 percent of the first $117,000 earned in wages and salaries. (Medicare is withheld on all wages and tips.) People with income from interest and dividend payments do not have to pay any Social Security tax on this income. What is the tax structure for the income tax over the income range of $0 to $117,000? O Proportional Tax O Progressive Tax Regressive Taxarrow_forwardWhat happens to fixed income when per capita incomes increases?arrow_forward
- If you received a 7% pay raise did your real income necessarily rise by 7%?arrow_forwardHow do factor endowments affect personal income? Examine different provisions employed by the government in dealing with inequality in the distribution of income.arrow_forwardI need the other side of the chart for progressive tax calculation.arrow_forward
- What is the relationship between the business world and U.S. political system for the inequalities in wealth and income?arrow_forwardMark Zuckerberg of Facebook and Elon Musk of Space X have taken risks to build to their businesses and been successful at it. The fundamental premise for their success mostly hinges on the ownership of private property and free market forces. For billionaires like them who have made their wealth mostly based on their own effort and perseverance, would it be fair to impose high income tax on them to redistribute their wealth to help the poor?arrow_forwardSuppose you earned $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket which taxes at 10% ranges from zero dollars to $30,000. The second tax bracket which tax at 25% ranges from 30,001 to $120,000. How much will you pay in total taxes?arrow_forward
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