Suppose you are a typical person in the U.S. economy. You pay 4 percent of your income in state income tax and 15.3 percent of your labor earnings in federal payroll taxes (employer and employee shares combined).

You also pay federal income taxes as in Table 3. How much tax of each type do you pay if you earn $20,000 a year?
Taking all taxes into account, what are your average and marginal tax rates?
What happens to your tax bill and to your average and marginal tax rates if your income rises to $40,000?

If you earn $20,000 a year, you would pay $800 in state income tax (4% of $20,000) and $3,060 in federal payroll taxes (15.3% of $20,000). Your federal income tax would depend on your filing status and other factors, but for a single filer with no dependents, you would pay $1,890 in federal income tax.

Taking all taxes into account, your average tax rate would be 17.3% ($4,750 in taxes divided by $27,500 in income) and your marginal tax rate would be 25.3% ($1,890 in federal income tax divided by $7,500 in additional income).

If your income rises to $40,000, you would pay $1,600 in state income tax (4% of $40,000) and $6,120 in federal payroll taxes (15.3% of $40,000). Your federal income tax would depend on your filing status and other factors, but for a single filer with no dependents, you would pay $4,890 in federal income tax.

Taking all taxes into account, your average tax rate would be 19.3% ($8,600 in taxes divided by $44,500 in income) and your marginal tax rate would be 22.3% ($4,890 in federal income tax divided by $15,000 in additional income).

To calculate the amount of tax you pay for each type, you need to consider both state income tax and federal payroll taxes.

For state income tax, you pay 4 percent of your income. So, if you earn $20,000 a year, your state income tax would be 4% of $20,000, which is $800.

For federal payroll taxes, you pay 15.3 percent of your labor earnings. This includes both the employer and employee shares. If you earn $20,000 a year, your federal payroll taxes would be 15.3% of $20,000, which is $3,060.

To calculate the federal income tax, you need to refer to Table 3. Unfortunately, without the specific details from Table 3, it is not possible for me to provide you with an accurate answer. You would need to consult the table or use a tax calculator to determine the federal income tax.

To calculate your average tax rate, you need to divide the total tax paid by your income. In this case, the total tax paid would be the sum of state income tax, federal payroll taxes, and federal income tax (if applicable). The average tax rate is the percentage of your income that goes towards taxes.

To calculate your marginal tax rate, you need to determine the rate at which your next dollar of income will be taxed. Essentially, it is the highest tax rate you pay on any additional income you earn.

If your income rises to $40,000, you would follow a similar process to calculate the taxes.

Specifically, for state income tax, you would still pay 4% of your income, resulting in $1,600 in taxes.

For federal payroll taxes, you would still pay 15.3% of your labor earnings. So, if your income is now $40,000, your federal payroll taxes would be 15.3% of $40,000, which is $6,120.

To calculate the federal income tax, you would need to refer to Table 3 as before.

To determine the new average and marginal tax rates, you would divide the total tax paid (including state income tax, federal payroll taxes, and federal income tax) by your income of $40,000.

Please note that the actual tax calculations may vary depending on specific tax laws, deductions, exemptions, and credits that apply to your situation.

To calculate the taxes paid on a $20,000 annual income, we need to consider state income tax, federal payroll taxes, and federal income taxes.

1. State Income Tax:
The state income tax rate is given as 4 percent of the income. So, the amount paid in state income tax can be calculated as:
$20,000 x 0.04 = $800

2. Federal Payroll Taxes:
The federal payroll taxes comprise the Social Security tax and Medicare tax. The total percentage for both employee and employer shares is given as 15.3 percent. So, the amount paid in federal payroll taxes can be calculated as:
$20,000 x 0.153 = $3,060

3. Federal Income Tax:
To calculate federal income tax, we need to refer to Table 3 (provided separately) to determine the tax brackets and corresponding tax rates. Once we determine which bracket the income falls into, we can calculate the amount paid in federal income tax.

Now, moving on to the next part of the question where the income increases to $40,000:

1. State Income Tax:
Using the same state income tax rate of 4 percent, the amount paid in state income tax would be:
$40,000 x 0.04 = $1,600

2. Federal Payroll Taxes:
Using the same federal payroll tax rate of 15.3 percent, the amount paid in federal payroll taxes would be:
$40,000 x 0.153 = $6,120

3. Federal Income Tax:
Just like before, we need to refer to Table 3 to determine the tax bracket and calculate the amount paid in federal income tax.

To calculate the average tax rate, we need to divide the total taxes paid by the total income.

For an income of $20,000:
Average Tax Rate = (State Income Tax + Federal Payroll Taxes + Federal Income Tax) / Income = ($800 + $3,060 + Federal Income Tax) / $20,000

For an income of $40,000:
Average Tax Rate = (State Income Tax + Federal Payroll Taxes + Federal Income Tax) / Income = ($1,600 + $6,120 + Federal Income Tax) / $40,000

To calculate the marginal tax rate, we need to determine the tax rate applicable to the last dollar earned. This can be found in the federal income tax brackets table. The marginal tax rate is the tax rate applicable to the highest tax bracket the income falls into.

The above calculations can be done accurately by referring to the specific tax brackets and rates provided in Table 3.