Explore BrainMass
Share

The distribution of income

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

In Taxland, the first \$10,000 earned per year is exempt from taxation. Between \$10,000.01 and \$30,000, the tax rate is 25 percent. Between \$30,000.01 and \$50,000 it's 30 percent. Above \$50,000, it's 35 percent. You're earning \$75,000 a year.

a) How much taxes will you have to pay?
c) Taxland has just changed to a tax credit system in which, in lieu of any exemption, eligible individuals are given a check for \$4,000. The two systems are designed to bring in the same amount of revenue. Would you favor or oppose the change? Why?

https://brainmass.com/economics/taxation/distribution-income-102599

Solution Preview

a) Tax on first 10,000 = 0
tax on next 20000 = 20000*25%=5000
tax on next 20000 = 20000*30%=6000
tax on next 25000=25000*35%=8750
Total Tax = 19750

b) Average Tax rate = 19750/75000=26.33%
Marginal ...

Solution Summary

The distribution of income is depicted.

\$2.19