Suppose the tax rate on the first $10,000 of income is 0 percent; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on income over $60,000. Family A has an income of $55,000. What is the tax liability of Family A? A) $7,500 B) $16,500 C) $3,400 D) $6,600

A. $7500

Explanation:

First 10000 : 0%

Next 20000: 10%

Next 20000: 20%

Next 20000: 30%

Over 60000: 40%

Therefore income of $55000 would have a tax liability as such

First - 0% of 10000 = 0

Second - 10% of 20000=2000

Third - 20% of 20000= 4000

Fourth - 30% of 5000= 1500

Total tax liability (TTL)= 0+2000+4000+1500

TTL = $7500

A) $7,500

Explanation:

We have to calculate for the differencial income on each bracket:

The first 10,000 are exempt thus, no taxation.

then it grows per 20,000 steps:

1st bracket: (30,000 - 10,000) x 10% =     2,000

2nd bracket (50,000 - 30,000) x 20% =  4,000

3er bracket (55,000 - 50,000) x 30% =    1,500

Total tax liability                                          7,500

Notice when we arrive at the family income we don't subtract from the celling (60,000 but, from their actual income of 55,000)

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