Question

Marginal and average 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 perform the following: a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of partnership earnings before taxes: $13,200; $81,800; $304,000; $496,000; $1.2 million; $1.5 million; and $1.9 million. b. Plot the average tax rates (measured on the y-axis) against the pretax income levels (measured on the x-axis). What generalization can be made concerning the relationship between these variables? a. Calculate the tax liability, after-tax earnings, and average tax rates for the following levels of partnership earnings before taxes: $13,200; $81,800; $304,000; $496,000; $1,200,000; $1.5 million; and $1.9 million. The tax liability for earnings before taxes of $13,200 is $. (Round to the nearest dollar.)
Please answer both A & B of the question! Will show gratitude

Answer 1

Answer-a:

Earning before taxes ($)	Tax on base income ($)	Tax on excess income ($)	Tax liability ($)	After tax earning ($)	Avg. tax rate
13200	upto 9,525 = 953	(13,200 - 9,525)*12% = 441	953 + 441 = 1,394	11806	1,394/13,200*100 = 10.56%
81800	upto 38,700 = 4,454	(81,800 - 38,700)*22% = 9,482	4,454 + 9,482 = 13,936	67864	13,936/81,800*100 = 17.04%
304000	upto 200,000 = 45,690	(304,000 - 200,000)*35% = 36,400	45,690 + 36,400 = 82,090	221910	82,090/304,000*100 = 27%
496000	upto 200,000 = 45,690	(496,000 - 200,000)*35% = 103,600	45,690 + 103,600 = 149,290	346710	149,290/496,000*100 = 30.10%
1200000	upto 500,000 = 150,690	(1,200,000 - 200,000)*37% = 259,000	150,690 + 259,000 = 409,690	790310	409,690/1,200,000*100 = 34.14%
1500000	upto 500,000 = 150,690	(1,500,000 - 200,000)*37% = 370,000	150,690 + 370,000 = 520,690	979310	520,690/1,500,000*100 = 34.71%
1900000	upto 500,000 = 150,690	(1,900,000 - 200,000)*37% = 518,000	150,690 + 518,000 = 668,690	1231310	668,690/1,900,000*100 = 35.19%

Answer-b:

Average tax rate 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 0 500000 1000000 1500000 2000000 Average tax rate

Comment: As the pre-tax income increases, Avergae tax rate also increase.

Earning before taxes	Average tax rate
$                          13,200	10.56%
$                          81,800	17.04%
$                       3,04,000	27.00%
$                       4,96,000	30.10%
$                    12,00,000	34.14%
$                    15,00,000	34.71%
$                    19,00,000	35.19%