Respuesta :
Flat tax would mean you pay: $8,800 (44,000*0.20)
Graduated Tax would mean you pay: $8,200 (25,000*0.10) + (19,000*0.30)
2,500 + 5,700
Paying a graduated tax is better for you.
Graduated Tax would mean you pay: $8,200 (25,000*0.10) + (19,000*0.30)
2,500 + 5,700
Paying a graduated tax is better for you.
Answer:
Graduated tax schedule.
Step-by-step explanation:
We have been given that you are offered a choice between paying a flat tax (one rate on all income) of 20% on $44,000 of income.
Let us find the amount of interest paid by finding 20% of $44,000.
[tex]\text{Amount of interest at flat tax rate}=\frac{20}{100}\times \$44,000[/tex]
[tex]\text{Amount of interest at flat tax rate}=0.20\times \$44,000[/tex]
[tex]\text{Amount of interest at flat tax rate}=\$8,800[/tex]
Therefore, the amount of interest paid at flat tax rate is $8,800.
Now we will find the amount paid under graduated tax schedule.
Firstly, we will find the 10% of $25,000 and then we will figure out 30% of $19,000 ($44,000-25,000).
[tex]\text{Amount of interest under graduated tax rate on 1st \$25,000}=\frac{10}{100}\times \$25,000[/tex]
[tex]\text{Amount of interest under graduate rate on 1st \$25,000}=0.10\times \$25,000[/tex]
[tex]\text{Amount of interest under graduated tax rate on 1st \$25,000}=\$2500[/tex]
[tex]\text{Amount of interest under graduated tax rate on income over \$25,000}=\frac{30}{100}\times \$19,000[/tex]
[tex]\text{Amount of interest under graduated tax rate on income over \$25,000}=0.30\times \$19,000[/tex]
[tex]\text{Amount of interest under graduated tax rate on income over \$25,000}=\$5,700[/tex]
The total amount of tax paid under graduated tax: [tex]\$2500+\$5700=\$8200[/tex]
Since amount of interest paid under graduated tax is $8,200, which is less than $8,800, therefore, graduated tax schedule is better for you.
