Question

The following table shows the U.S. rates of personal tax as of year 2016, and these tax rates presented in this table are marginal tax rates, Single Taxpayers Married Taxpayers Filing Joint Returns Tax Rate (%) 0-$9.275 0-$18,550 10.0 $9,276-$37,650 $18,551-$75,300 15.0 $37,651-$91,150 $75,301-$151,900 25.0 $91,151-$190,150 $151,901-$231,450 128.0 $190,151-$413,350 $231,451-$413,350 33.0 $413,351-$415,050 $413,351-$466,950 35.0 $415,051 and above $466,951 and above 39.6 Based on this table, answering the following questions: (Please show your intermediate processes, instead of just a final number for your answers. Only round your final answers to two decimal places.) a1. Suppose there is a person called Alpha who has an annual income of $300,000 and Alpha's spouse has an annual income of $20,000. What dollar amount of tax do Alpha and Alpha's spouse each need to pay respectively, if they choose to file their taxes separately? What dollar amount of tax they need to pay if they choose to file their taxes jointly? 12. What are teh average tax rates for Alpha and Alpha's spouse respectively, if they choose to file separately? What is the average tax rate if they choose to file jointly? 11. Suppose there is another person called Beta who has an annual income of $160,000 and Beta's spouse also has an annual income of $160,000. What dollar amount of tax do Beta and Beta's spouse each need to pay respectively, if they choose to file their taxes separately? What dollar amount of tax they need to pay if they choose to file their taxes jointly? b2. What are the average tax rates for Beta and Beta's spouse respectively, if they choose to file separately? What is the average tax rate if they choose to file jointly? c. Based on what you obtained from alto b2, what are the conclusions you could infer regarding the ways of filing taxes? (what are the advantages and disadvantages of these two ways?)

Answer 1

PARTICULARS	IF FILE TAXES SEPARATELY	IF FILE TAXES JOINTLY
a1.Amount of tax need to pay		105,600
- Alpha	99,000
-Alpha's spouse	3,000
a2.Average Tax Rate	24%	33%

b1.Amount of tax need to pay		105600
--Beta	44800
-Beta's spouse	44800
b2.Average tax rate	14%	33%

c.Based on above calculation it is clear that Alpha and Beta and their respective spouse should file the taxes separately as they have to pay less tax in this.