Asked by Jahmorai Thomas on Jun 06, 2024
Verified
Refer to Scenario 12-3. The taxpayer faces
A) an average tax rate of 30 percent when her income is $40,000.
B) an average tax rate of 23 percent when her income is $60,000.
C) a marginal tax rate of 30 percent when her income rises from $20,000 to $20,001.
D) a marginal tax rate of 50 percent when her income rises from $40,000 to $60,000.
Marginal Tax Rate
The amount of tax applied to an additional dollar of income, often used in progressive tax systems.
Average Tax Rate
The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), expressing the percentage of income that is paid in taxes.
Income
Monetary payment received for work, from investments, or from government benefits, contributing to an individual's wealth.
- Familiarize oneself with the concepts of marginal and average tax rates.
- Use knowledge of taxation rates to ascertain tax liability.
Verified Answer
PL
Patricia LopezJun 11, 2024
Final Answer :
B
Explanation :
At an income of $60,000, the taxpayer pays 20% on the first $40,000 ($8,000) and 30% on the next $20,000 ($6,000), totaling $14,000 in taxes. The average tax rate is $14,000 / $60,000 = 23.33%, rounded to 23%.
Learning Objectives
- Familiarize oneself with the concepts of marginal and average tax rates.
- Use knowledge of taxation rates to ascertain tax liability.