13: Chapter mazpeosr, Section .122, Problem 09s (1D: 098.12.2-MC - MANKOB) Pract

Question

13: Chapter mazpeosr, Section .122, Problem 09s (1D: 098.12.2-MC - MANKOB) Practice 13. Chapter mazpe08r, Section.122, Problem 098 (098.12.2-MC - MANKO8) Scenario 12-4 A taxpayer faces the following tax rates on her income 20 percent of the first $40,000 of her Income 30 percent of all her income above $40,000 Refer to Scenario 12-4. At what level d the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent? 13,000 aon of-4029ooo 6op00 201.ofuppo a. $42,000 b. $57,000 coo c. $60,000 es.aplia.com/af/serviet/print courses.apia.cui tp://courses.aplia.com/at/servlet/print

Explanation / Answer

Let the income be X. Marginal tax rate is 30 % which implis he pays a tax under second slab of tax rate. This gives

Tax amount = 20% x 40000 + 30%*(X - 40000)

Average tax rate = Tax amount / Taxable income

25% = 20% x 40000 + 30%*(X - 40000) / X

25% of X = 8000 + 30% of X - 12000

4000 = 5% of X

X*= 80000

His income is 80000.

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