Question

During​ 2015, the Smiths and the Jones both filed joint tax returns. For the tax year ended December​ 31, 2015, the​ Smiths' taxable income was $134,000​, and the Jones had total taxable income of $67,000.

a. Using the federal tax rates given in Table​ 1.2, for married couples filing joint​ returns, calculate the taxes for both the Smiths and the Jones. Joint taxes are required.

b. Calculate and compare the ratio of the​ Smiths' to the​ Jones' taxable income and the ratio of the​ Smiths' to the​ Jones' taxes. What does this demonstrate about the federal income tax​ structure?

​ (Round to the nearest​ dollar.)

TABLE​ 1.2: Tax Rates and Income Brackets for Joint Returns​(2015)
	Taxable Income
Tax Rates	Joint Returns
​10%	​$0 to​ $18,150
​15%	​$18,151 to​ $73,800
​25%	​$73,801 to​ $148,850
​28%	​$148,851 to​ $226,850
​33%	​$226,851 to​ $405,100
​35%	​$405,101 to​ $457,600
​39.6%	Over​ $457,600

Answer 1

a). The Smiths’ taxable income was $ 134,000

= (0.10*$18,150) + [0.15*($73,800 - $18,150)] + [0.25*($134,000 - $73,800)]

= $1,815 + $8,347.50 + $15,050 = $25,212.50

The Jones’ taxable income was $ 67,000

= (0.10*$18,150) + [0.15*($67,000 - $18,150)] = $1,815 + $7,327.50 = $9,142.50

b).

1. The Smiths pays about 18.82% of their income in taxes ($25,212.50÷$134,000)

2. The Jones pays about 13.65% of their income in taxes ($9,142.50÷$67,000)

The progressive nature of the federal income tax structure demonstrate that although the difference in the percentage of taxes between the Smiths and the Jones is only 5.17%, in monetary terms the smith must pay about 2.76 times that it paid by the Jones.