Asked by Scott Jordan on Apr 25, 2024
Verified
Suppose the government taxes 10 percent of the first $30,000 in income and 20 percent of all income over $30,000. Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.
Marginal Tax Rate
The tax rate applied to the next dollar of taxable income, indicating how much tax will be paid on an additional dollar earned.
Average Tax Rate
The fraction of total income that is paid as taxes, calculated by dividing the total amount of tax paid by the total income.
Income
The money received by an individual or group for work, from investments, or from other sources, often used as an indicator of economic standing.
- Expound on fundamental taxation notions such as marginal tax rate, horizontal equity, and the principles that rationalize specific taxes.
Verified Answer
MM
Mahua Mukherjee7 days ago
Final Answer :
The marginal tax rate would be 20 percent because the person earns more than $30,000. The average tax rate would be 15.7%. The person pays $3,000 on the first $30,000 of income and $8,000 on the remaining $40,000 of income. $11,000/$70,000=15.7%.
Learning Objectives
- Expound on fundamental taxation notions such as marginal tax rate, horizontal equity, and the principles that rationalize specific taxes.