Suppose There Is a Simple Tax System That Says You

question 9

Essay

Suppose there is a simple tax system that says you pay 10% for income up to $40,000, 25% for income between $40,000 and $100,000, and 35% for all income above $100,000. Mr. Campbell has income of $122,000. Mrs. Campbell has income of $55,000.
What is Mr. Campbell's individual tax liability? Mrs. Campbell's?
Suppose that Mr. Campbell can transfer up to $50,000 in income to his wife. How much should Mr. Campbell transfer to minimize the income tax paid? How much tax could they save by transferring income?

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