Final answer:
Carolina's income after taxes from her nail salon and day spa is referred to as her net income. This includes profits after corporate income tax, individual income tax on her salary, and payroll taxes on wages. Local business owners like Carolina influence the local economy by how they spend their net income.
Step-by-step explanation:
When Carolina's nail salon and day spa start bringing in income, her income less all additional personal taxes would be her net income. To understand this better, let's explore what Carolina would deal with financially once her business becomes profitable. First, we need to consider the different types of taxes a business owner like Carolina may encounter:
- Corporate income tax on the profits of her business.
- Individual income tax on her salary.
- Payroll tax taken out of the wages she pays herself and her employees.
After these taxes are deducted from her business's gross income, what remains is her net income. This is the money she actually gets to keep and use personally. This scenario mirrors that of other local businesses, where the owners may not be as financially high-flying as professional athletes, and thus, their tax obligations might be lower. However, they generally contribute more to the local economy by spending a higher proportion of their net income on local goods. The information provided indicates that local business owners pay around 35% of their marginal income in taxes, have a marginal propensity to consume (MPC) of 0.8, and spend 65% of their income locally. These factors significantly influence Carolina's financial standing and, therefore, her net income, which would be the result after taxes are subtracted from her business income.
It's also vital for Carolina to understand how these taxes can affect her savings. Like the professional athletes mentioned, after paying taxes, business owners decide how much of their net income to save and how much to spend. The decision to save or spend affects not only their personal finances but also the local economy as their expenditure circulates within the community.