economics

Suppose the income tax rate schedule is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on any income over $70,000. Family A earns $28,000 a year and Family B earns $65,000 a year. Both receive a ten percent raise. What is the marginal tax rate of each and what is the extra tax paid by each after the raise?

A. Family A: 20 percent marginal tax rate and $560 in extra taxes. Family B: 40 percent marginal tax rate and $2600 in extra taxes.

B. Family A: 20 percent marginal tax rate and $360 in extra taxes; Family B: 40 percent marginal tax rate and $2100 in extra taxes.

C. Family A: 15 percent marginal tax rate and $420 in extra taxes; Family B: 35 percent marginal tax rate and $2275 in extra taxes.

D. Family A: 10 percent marginal tax rate and $280 in extra taxes; Family B: 30 percent marginal tax rate and $1950 in extra taxes.

  1. 👍
  2. 👎
  3. 👁
  1. Is the answer D?

    (I picked D I think the marginal tax rates are correct, but I'm not sure how to calculate the extra tax paid)

    1. 👍
    2. 👎
  2. I think the correct answer is B.
    For A, income goes from 28000 to 30800, a change of 2800. Since the new income is between 30000 and 50000, the mtr is 20%. Of the change in income of 2800, 2000 was taxed at the 10% rate and the remaining 800 was taxed at the 20% rate. So, .1*2000+.2*800 = 360.

    Repeat for Family B.

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. Finance

    Nico Trading corporation is considering issuing long-term debt. The debt would have a 30 year maturity an a 10 percent coupon rate. In order to sell the issue, the bonds must be underpriced at a discount of 5 percent of face

  2. business math

    Samantha Vega gross weekly salary is 600 dollars her weekly federal withholding is 35 dollars . the Social Security tax is 6.2 percent of the first 90,000 . the Medicare tax is 1.45 percent of gross pay. this state tax is 1.5

  3. Financial management

    Tangshan Mining is considering issuing long-term debt. The debt would have a 30 year maturity and a 12 percent coupon rate and make semiannually coupon payments. In order to sell the issue, the bonds must be underpriced at a

  4. Financial Management

    Reading Foods is interested in calculating its weighted average cost of capital (WACC). The company’s CFO has collected the following information: • The target capital structure consists of 40 percent debt and 60 percent

  1. Finance

    A firm has return on equity of 15 percent, earnings before taxes of $30,000, total asset turnover of .80, a profit margin of 4.5 percent, and a tax rate of 35 percent. What is the return on assets?

  2. Math

    Amanda Sabino's taxable income is $20,900.00. How much will she pay in state tax? Tax Table- First $2,000: 2.0% rate Next $4,000: 3.0% rate Next $4,000: 4.5% rate Over $10,000: 6.0% rate My answer-$1254 Am I correct? Thank you!!

  3. Math (Accounting)

    Reading Foods is interested in calculating its weighted average cost of capital (WACC). The company’s CFO has collected the following information: • The target capital structure consists of 40 percent debt and 60 percent

  4. Economics

    The assessed value of Patty's residential property was $200,000 in 2004. In 2006, the assessed value increased to $225,000. The property tax rate in both years was 1.2 percent. Patty earned $60,000 each year. Determine Patty’s

  1. Economics

    Mallory's total income last year was $24,000, but she could deduct $12,000 for various reasons. Her taxable income equals the amount left over after deductions. If she had to pay 15 percent of her taxable income in federal income

  2. Accounting PLEASE HELP!!!!!!!!!

    Reading Foods is interested in calculating its weighted average cost of capital (WACC). The company’s CFO has collected the following information: • The target capital structure consists of 40 percent debt and 60 percent

  3. finance

    Tangshan Mining is considering issuing long-term debt. The debt would have a 30 year maturity and a 12 percent coupon rate and make semiannual coupon payments. In order to sell the issue, the bonds must be underpriced at a

  4. economics

    suppose the income elasticity of demand for toys is +2.00. this means that a. a 10 percent increase in income will increase the purchase of toys by 20 percent b. a 10 percent increase in income will increase the purchase of toys

You can view more similar questions or ask a new question.