Question

In a certain jurisdiction, John who is earning $35,000 currently pays a flat percentage of 15% in income tax. The tax

authorities suggest a change to a progressive income tax system, where the rules for taxation are as follows:
1. Charging 10% on a person's income up to $20,000
2. Charging 30% on any income above that
How much more will john be paying in income tax under the proposed changes? Give your answer in dollars to the nearest
dollar.

Answer 1

Answer: $1,250

Explanation:

Flat percentage income tax: $35,000 × 0.15 = $5,250

Progressive income tax: $20,000 × 0.10 + $15,000 × 0.30 = $6,500

The difference between the two tax rates: $6,500 - $5,250 = $1,250