Homework Answers
a.
Amount of total tax for the income $70,000:
First $10,000 at 5% = $10,000 × 5% = $500
Income more than $10,000 to $20,000 at 15% = (20,000 – 10,000) × 15% = 10,000 × 15% = $1,500
Income more than $20,000 to $30,000 at 25% = (30,000 – 20,000) × 25% = 10,000 × 25% = $2,500
Income above $30,000 at 35% = (70,000 – 30,000) × 35% = 40,000 × 35% = $14,000
Total tax = 500 + 1,500 + 2,500 + 14,000 = $18,500 [Answer]
b.
Marginal tax rate is the rate of tax on the last dollar of income, which is 35% here.
c.
Average tax rate = (Total tax / Taxable income) × 100
= ($18,500 / $70,000) × 100
= 26.42857… %
= 26% (rounded)
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