Question

Marginal tax rates   Partner​ A, a single​ taxpayer, is one of two partners in a small business. As​ such, she receives​ pass-through income that is taxed at her personal tax rates. After all adjustments and deductions have been​ made, including the​ 20% qualified business income​ deduction, she is preparing to calculate her taxes owed for the year. Using the tax rate schedule given here (SEE BELOW) perform the​ following:

a. Find the marginal tax rate for the following levels of sole proprietorship earnings before​ taxes:

$16500, $58200, $91500, $151000, $251000, $452000 and $1.4 million

b. Plot the marginal tax rates​ (measured on the ​y-​axis) against the pretax income levels​ (measured on the ​x-​axis). Explain the relationship between these variables.

Tax Rate - Single Taxpayers -2018

Tax calculation Range of taxable income Base tax + (Marginal rate × amount over base bracket)

$0 to $9,525 . $0 + (10% × amount over $0)

9,525 to 38,700 953 + (12% × amount over 9,525)

38,700 to 82,500 . 4,454 + (22% × amount over 38,700)

82,500 to 157,500 14,090 + (24% × amount over 82,500)

157,500 to 200,000 32,090 + (32% × amount over 157,500)

200,000 to 500,000 45,690 + (35% × amount over 200,000)

Over 500,000 150,690 + (37% × amount over 500,000)

a. The marginal tax rate for earnings before taxes of $16,500 is .....​%. ​(Round to the nearest​ integer.)

Answer 1

(a) Statement Showing Marginal Tax rates at differnent level of incomes

Income befor taxes	tax rate on base income	tax on excess income	total tax	Marginal tax rate
$16500	upto 9525=953	16500-9525=6975*12% =837	=953+837 =1790	12%
$58200	upto 38700=4454	58200-38700=19500*22% =4290	=4454+4290 =8744	22%
$91500	upto 82500=14090	91500-82500=9000* 24% =2160	=14090+2160 =16250	24%
$151000	upto 82500=14090	151000-82500=68500 =68500*24% =16440	=16440+14090 =30530	24%
$251000	upto 200000 =45690	251000-200000=51000 =51000*35% =17850	=45690+17850 =63540	35%
$452000	upto 200000=45690	452000-200000=252000 =252000*35% =88200	=45690+88200 =133890	35%
$1400000	upto 500000=150690	1400000-500000=900000 =900000*37% =333000	=333000+150690 =483690	37%

Marginal Tax rate is rate of tax which is paid on higher level of income which means every excess income over base income paid with the highest rate of tax .

(B) Statement of graph with there relationship shown in attachment

as lower income $9525 shows marginal tax rate to be 10% and every single excess money will be charged @ 12% marginal tax upto income 38700 and when income above 500000 is charged @ 37%