Question

A proposed income tax charges 10% on a person's income up to $25,000 and then 20% on income above that. If a person has income of $60,000, what will their income tax be under the proposal?

Answer 1

Answer:The problem says that income up to $25,000 will be taxed at 10%. This is the first tier (or bracket). People who make more than $25,000, will pay 10% of their initial $25,000, and the higher rate of 20% on any income above $25,000. This is the second tier.

Let's calculate the amount of tax in this particular case. For a person making $60,000, they'll pay 10% of the first $25,000, and then 20% of the additional $35,000. We have,

Total Income Tax=Tax from Tier 1+Tax from Tier 2=10100⋅$25,000+20100⋅($60,000−$25,000)=$2,500+$7,000=$9,500.

Under the proposal, this person will pay $9,500 in taxes.

Answer 2

Explanation:

The given parameters are:

10% on the first $25,000 of income

20% on income above $25,000

The above means that;

T(x) = x * 10%, when x <= 25000

T(x) = x* 20%, when x > 25000

Evaluate the products

T(x) = 0.1x, when x <= 25000

T(x) = 0.2x, when x > 25000

In this case, x = 60000

60000 > 25000

So, we have:

T(60000) = 0.2 * 60000

Evaluate

T(60000) = 12000

Hence. if a person has income of $60,000, their income tax be under the proposal would be $12000