Last Year,Anthony Millanti Earned Exactly $30,000 of Taxable Income

question 228

Essay

Last year,Anthony Millanti earned exactly $30,000 of taxable income.Assume that the income tax system used to determine Anthony's tax liability is progressive.The table below lists the tax brackets and the marginal tax rates that apply to each bracket.
a.Draw a new table that lists the amounts of income tax that Anthony is obligated to pay for each tax bracket,and the total tax he owes the government.(Assume that there are no allowable tax deductions,tax credits,personal exemptions,or any other deductions that Anthony can use to reduce his tax liability).
b.Determine Anthony's average tax rate.
$$\begin{array} { | c | c | } \hline & \text { Marginal Tax } \\\text { Tax Bracket }&\text {Rate}\\\hline \$ 0 - 5,000 & 0.05 ( 5 \% ) \\\hline 5,001 - 10,000 & 0.10 ( 10 \% ) \\\hline 10,001 - 15,000 & 0.15 ( 15 \% / 6 ) \\\hline 15,001 - 20,000 & 0.20 ( 20 \% / 6 ) \\\hline 20,001 - 25,000 & 0.25 ( 25 \% / 6 ) \\\hline 25,001 - 30,000 & 0.30 ( 30 \% / 6 ) \\\hline\end{array}$$

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Definitions:

Loan Date

The specific date on which a loan agreement is signed, and the funds are disbursed to the borrower.

Plant Capacity

Plant capacity refers to the maximum output or production that a manufacturing facility can achieve under normal conditions.

Variable Costs

Costs that vary directly with the level of production or volume of output, in contrast to fixed costs.

Fixed Costs

Costs that remain constant regardless of a company's level of activity, including lease payments, wages, and insurance fees.