Suppose that there is a flat 20% income tax rate,but otherwise U.S.tax law is the same as that in place.You make $40,000 per year.If your employer pays for your $4,000 per year insurance policy and deducts the expense from your salary,your after-tax,after-insurance take-home pay is __________.If you pay for your $4,000 per year policy directly,your after-tax,after-insurance take-home pay is ____________.

Question

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If the employer pays for the insurance and deducts it from the salary, the taxable income becomes $36,000 ($40,000 - $4,000). With a 20% tax rate, the tax is $7,200 ($36,000 * 20%), leaving a take-home pay of $28,800 ($36,000 - $7,200). If you pay for the insurance directly, your taxable income remains $40,000, leading to an $8,000 tax ($40,000 * 20%). After paying the $4,000 insurance, the take-home pay is $28,000 ($40,000 - $8,000 - $4,000).

Suppose That There Is a Flat 20% Income Tax Rate,but