Assume the marginal tax rate for income above $25000 has risen to 30 percent.If the tax rate for the income less than $25000 is 10 percent,how much tax a person with an income of $40,000 will pay?

Question

Quizplus · Accepted Answer

The income tax for the amount above $25000 is calculated as follows:

Tax on income above $25000 = (Income above $25000) x (Tax rate) = ($40,000 - $25,000) x 0.30 = $4,500

The income tax for the amount below $25000 is calculated as follows:

Tax on income below $25000 = (Income below $25000) x (Tax rate) = $25,000 x 0.10 = $2,500

Therefore, the total tax paid is:

Total tax = Tax on income above $25000 + Tax on income below $25000 = $4,500 + $2,500 = $7,000

So, the correct answer is (C) $7000

Assume the Marginal Tax Rate for Income Above $25000 Has