Using the table of Progressive Taxes below, compute the taxable income and taxes for the...
Question:
Using the table of Progressive Taxes below, compute the taxable income and taxes for the following taxpayers.
Which taxpayer has
a. the highest nominal tax rate?
b. the highest effective tax rate?
c. the highest marginal tax rate?
| Taxpayer | Gross Income | Exemptions and Deductions | Taxable Income | Tax |
|---|---|---|---|---|
| A | $20,000 | $6,000 | - | - |
| B | $40,000 | $28,000 | - | - |
| C | $80,000 | $34,000 | - | - |
| D | $200,000 | $110,000 | - | - |
Table: Progressive Taxes
| Tax Bracket | Marginal Tax Rate |
|---|---|
| $1 - $8,375 | 10% |
| $8,375 - $34,000 | 15% |
| $34,000 - $82,400 | 25% |
| $82,400 - $171,850 | 28% |
| $171,850 - $373,650 | 33% |
| Over $373,650 | 35% |
Source: Internal Revenue Service (2010 tax rates for single individuals).
Progressive Tax Rates:
Progressive tax rates means as income taxable income increases, so does the tax rate. Once income thresholds are met, any additional dollar will be taxed at a marginal tax rate. Once other thresholds are met, an increase will occur on every dollar made after that amount.
Answer and Explanation: 1
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View this answer| Taxpayer | Gross Income | Exemptions and Deductions | Taxable Income | Tax |
|---|---|---|---|---|
| A | $20,000 | $6,000 | 14,000 | 1,681.25 |
| B | $40,000 | $28,000 | 12,000 | 1,381.25 |
| C | $80,000 | $34,000 | 46,000 | 7,681.... |
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Understanding the Progressive Tax Code
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Chapter 13 / Lesson 6
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A progressive tax code means that individuals who earn a higher income pay more taxes. Learn about the three types of tax codes (progressive, regressive, and proportional) and the primary economic effect for each method of taxation.
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