Suppose that in 2013, Congress passed and the president signed a new simple inco

Question

Suppose that in 2013, Congress passed and the president signed a new simple income tax with a flat rate of 25 percent on all income over dollar20,000 (no tax on the first dollar20,000). Assume that the tax is imposed on every individual separately. For each of the following total income levels, calculate taxes due and compute the average tax rate. If income is dollar35,000, then total taxes due is dollar squarebox and the average tax rate is squarebox percent. (Enter your responses rounded to two decimal places.)

Explanation / Answer

The total taxes due are computed as follows:

Total income = 35,000

Non-taxable income = $20,000

Taxable Income = 15,000

Total tax dues = 15,000*25/100 = $3750

Hence the total taxes due = $3750

The average tax rate if 25% since the total taxable income falls within the 25% income tax slab.

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