If provincial tax rates are 16% on the ﬁrst $40,100; 20% on the next $40,100; and 24% on any income after that. If a resident had income of $95,000, then determine the average provincial tax rate.

Question

Quizplus · Accepted Answer

To determine the average provincial tax rate, we need to take the total amount of provincial taxes paid and divide it by the total income earned.

For income up to $40,100, the provincial tax rate is 16%, so the amount of tax paid on this portion of income is:

$40,100 x 0.16 = $6,416

For income between $40,100 and $80,200, the provincial tax rate is 20%, so the amount of tax paid on this portion of income is:

($80,200 - $40,100) x 0.20 = $8,020

For the remaining income above $80,200, the provincial tax rate is 24%, so the amount of tax paid on this portion of income is:

($95,000 - $80,200) x 0.24 = $3,552

Therefore, the total provincial taxes paid is:

$6,416 + $8,020 + $3,552 = $17,988

The total income earned is $95,000, so the average provincial tax rate is:

$17,988 ÷ $95,000 x 100% = 18.93%

Therefore, the answer is B) 18.93%.

If Provincial Tax Rates Are 16% on the ﬁRst $40,100;