Chapter 16, Problem 20AA

a.

To determine

To find:The range of tax rates that can be paid by a single person.

Explanation of Solution

The tax applied to personal income is a certain percentage of income. This is levied by state and federal governments and is a major source of federal revenue. Tax levied on personal income is progressive at the federal level and is proportional at the state level.The range of tax rates in which a single person pays tax is 10% to 35%.

b.

To determine

To find:The amount of tax to be paid by a person when earnings are $30,000.

Explanation of Solution

Given information:

The income of Person K is $30,000.

Calculation of tax to be paid by Person K:

As per the slab for income ranging from $7,550 to $30,650, tax to be payable will be $755 and 15% of the amount over $7,550.

  $\begin{array}{c}Tax=\$755+15\%of\left(\$30,000-\$7,550\right)\\ =\$755+15\%of\$22,450\\ =\$755+\$3,367.50\\ =\$4,122.50\end{array}$

Hence, the amount of tax to be paid by Person K is $4,122.50