Question

The income tax policy for residents of a tiny island nation that uses U.S. Dollars as its currency is as follows: The first $20,000 of a citizen’s income is taxed at a rate of 10%. The next $30,000 of the citizen’s income is taxed at a rate of 18%. Any amount over $50,000 is taxed at a rate of 27%.

How much income tax would an individual with an income of x dollars be charged, where x is at least $50,000?

0.10(20,000) + 0.18(30,000) + 0.27x
0.10(x − 20,000) + 0.18(x − 30,000) + 0.27x
0.10(20,000) + 0.18(30,000) + 0.27(x − 50,000)
0.10(20,000) + 0.18(30,000) + 0.27(50,000 − x)

Answer 1

C.

0.10(20,000) + 0.18(30,000) + 0.27(x − 50,000)

Explanation:

Let's take this one step at a time. First, the $20000 dollars is taxed by 10% = .10 as a decimal. So the first term is

.10(20000)

Next, we have to add on the second term, wherein the next $30000 is taxed by .18. So the second term is

.10(20000) + .18(30000)

Then, we have to take whatever's left, whatever we haven't yet taxed, and tax it at a 27% rate. This means x-50000, not x, because we're taking whatever's over the initial 50000 that we've already taxed.

0.10(20,000) + 0.18(30,000) + 0.27(x − 50,000)