Question 1

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000,40 percent of the next $50,000,and 60 percent of all income over $100,000.Marshall earns $200,000,and Lily earns $600,000.Which of the following statements is correct?

Accepted Answer

Lily's income places her in the highest tax bracket for a portion of her income, which increases her average tax rate compared to Marshall, who has a portion of his income taxed at lower rates. Marshall's marginal tax rate (the rate on the last dollar earned) is the same as Lily's if we only consider the given tax brackets, but Lily's average tax rate (total tax paid divided by total income) is higher because a larger portion of her income is subject to the highest tax rate.

Question 2

A person's tax obligation divided by her income is called her

Accepted Answer

The calculation of dividing a person's tax obligation by her income gives the average tax rate. The marginal social tax rate refers to the tax rate on both the employee and employer for social security and medicare, while the marginal private tax rate refers to the tax rate on additional income earned. The marginal tax rate refers to the tax rate on the last dollar earned.

Question 3

Under a progressive tax system,the marginal tax rate could be equal to the average tax rate only when a taxpayer

Accepted Answer

The marginal tax rate refers to the tax rate applied to the last dollar of income earned, while the average tax rate is the total amount of tax paid divided by total income earned. Under a progressive tax system, the marginal tax rate increases as the taxpayer's income increases. Therefore, the only way for the marginal tax rate and the average tax rate to be equal is if the taxpayer has a very low income and is only being taxed at the lowest tax bracket.

Question 4

If we want to gauge the sacrifice made by a taxpayer,we should use the

Accepted Answer

The average tax rate, which is the total tax paid divided by total income, best measures the sacrifice made by a taxpayer because it reflects the proportion of their income that is paid in taxes.

Question 5

Which of the following statements is correct?

Accepted Answer

The statement "The average tax rate gauges the sacrifice made by a taxpayer, whereas the marginal tax rate gauges the distortion of taxes on consumer decisions" is correct. The average tax rate calculates the total amount of taxes paid divided by taxable income, which measures the sacrifice made by a taxpayer. On the other hand, the marginal tax rate measures the increase in taxes that would result from an additional dollar of income, which gauges the distortion of taxes on consumer decisions.

Question 6

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000.For a person earning $100,000,the marginal tax rate is

Accepted Answer

The marginal tax rate is the percentage of tax paid on the last dollar earned. 
For a person earning $100,000, the first $70,000 will be taxed at 30%, which is $21,000. 
The remaining $30,000 will be taxed at 50%, which is $15,000. 
Thus, the total tax paid is $21,000 + $15,000 = $36,000. 
The average tax rate is the total tax paid divided by the total income. 
Thus, the average tax rate is $36,000 / $100,000 = 36%.

Question 7

Bert faces a progressive tax structure that has the following marginal tax rates: 0 percent on the first $10,000,10 percent on the next $10,000,15 percent on the next $10,000,25 percent on the next $10,000,and 50 percent on all additional income.If Bert earns $75,000,what is his average tax rate?

Accepted Answer

The answer of Bert faces a progressive tax structure that...

Question 8

Pat calculates that for every extra dollar she earns,she owes the government 40 cents.Her total income now is $44,000,on which she pays taxes of $11,000.Determine her average tax rate and her marginal tax rate.

Accepted Answer

The average tax rate is calculated by dividing the total amount of taxes paid by the total income. So, in this case:
Average tax rate = (total taxes paid / total income) x 100
Average tax rate = (11,000 / 44,000) x 100
Average tax rate = 25%

The marginal tax rate is the percentage of tax paid on the next dollar earned. In this case, Pat owes 40 cents on every extra dollar earned, which means her marginal tax rate is 40%.

Question 9

Maurice faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000,10 percent on the next $10,000,15 percent on the next $10,000,25 percent on the next $10,000,and 50 percent on all additional income.In addition,he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes.Maurice earns $60,000 per year in salary and another $10,000 per year in non-labor income.What is his average tax rate?

Accepted Answer

The answer of Maurice faces a progressive federal income tax...

Question 10

The average tax rate measures the

Accepted Answer

The average tax rate is calculated by dividing the total amount of taxes paid by the total income earned. Therefore, it measures the fraction of income paid in taxes. Option A is incorrect as it refers to a measure of the overall tax burden, not the average tax rate. Option C refers to marginal tax rate, not average tax rate. Option D is incorrect as it refers to a measure of inefficiency caused by taxes, not the average tax rate.

Question 11

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000.What is the marginal tax rate when income is $60,000?

Accepted Answer

When income is $60,000, the taxpayer pays 20% tax on the first $50,000, which is a tax of $10,000. The remaining $10,000 is subject to a 30% tax, which is a tax of $3,000. Therefore, the total tax paid on $60,000 of income is $13,000. The marginal tax rate is the tax rate paid on the next dollar of income. When income increases from $59,999 to $60,000, the tax paid increases from $12,977 to $13,000, which is an increase of $23. Therefore, the marginal tax rate is 23%.

Question 12

Pat calculates that for every extra dollar she earns,she owes the government 33 cents.Her total income now is $35,000,on which she pays taxes of $7,000.Determine her average tax rate and her marginal tax rate.

Accepted Answer

To calculate Pat's average tax rate, we need to divide the total taxes paid ($7,000) by her total income ($35,000) and multiply by 100 to get a percentage:

Average tax rate = ($7,000/$35,000) x 100 = 20%

To calculate Pat's marginal tax rate, we need to look at the tax rate she pays on the next dollar she earns. We know that for every extra dollar she earns, she owes the government 33 cents. This means that her marginal tax rate is 33%.

Therefore, the correct choice is B: Her average tax rate is 20% and her marginal tax rate is 33%.

Question 13

The income tax requires that taxpayers pay 10% on the first $40,000 of income and 20 percent on all income over $40,000.Karen paid $6,000 in taxes.What were her marginal and average tax rates?

Accepted Answer

The answer of The income tax requires that taxpayers pay...

Question 14

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000,50 percent of the next $30,000,and 60 percent of all income over $50,000.Ted earns $40,000,and Robin earns $60,000.Which of the following statements is correct?

Accepted Answer

For Ted, the first $20,000 is taxed at 30 percent, which amounts to $6,000. The next $20,000 ($40,000 - $20,000) is taxed at 50 percent, which amounts to $10,000. So in total, Ted's tax liability is $16,000. Therefore, his average tax rate is ($16,000/$40,000) * 100 percent = 40 percent. Ted's marginal tax rate is the tax rate on the next dollar of income, which is 50 percent as he moves into the next tax bracket.

For Robin, the first $20,000 is taxed at 30 percent, which amounts to $6,000. The next $30,000 ($50,000 - $20,000) is taxed at 50 percent, which amounts to $15,000. All income above $50,000 is taxed at 60 percent. So her tax liability is $6,000 + $15,000 + ($60,000 - $50,000) * 60 percent = $6,000 + $15,000 + $6,000 = $27,000. Therefore, her average tax rate is ($27,000/$60,000) * 100 percent = 45 percent. Her marginal tax rate is the tax rate on the next dollar of income, which is 60 percent as she moves into the last tax bracket.

Question 15

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000.What is the average tax rate when income is $60,000?

Accepted Answer

The answer of Suppose the government imposes a tax of...

Question 16

Total taxes paid divided by total income is called the

Accepted Answer

The total taxes paid divided by total income is the average tax rate.

Question 17

A person's average tax rate equals her

Accepted Answer

A person's average tax rate is their tax obligation (the amount of taxes they owe) divided by their income.

Question 18

If your income is $50,000,your income tax liability is $10,000,and you paid $0.25 in taxes on the last dollar you earned,your

Accepted Answer

The marginal tax rate is the tax rate applied to your last dollar earned. In this case, the taxpayer paid $0.25 in taxes on the last dollar earned. Therefore, the marginal tax rate is 25 percent. The average tax rate is the total tax liability divided by the total income. In this case, the taxpayer paid $10,000 in taxes on an income of $50,000, which results in an average tax rate of 20 percent. However, this is not one of the choices provided, so the closest choice is C, which is the correct answer based on the given information.

Question 19

If your income is $40,000 and your income tax liability is $5,000,your

Accepted Answer

To calculate the average tax rate, divide the total tax liability (in this case, $5,000) by the taxable income (in this case, $40,000):

$5,000 ÷ $40,000 = 0.125

Multiply by 100 to get the percentage:

0.125 x 100 = 12.5%

Therefore, the correct answer is D: average tax rate is 12.5 percent.

Question 20

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

Accepted Answer