Thas a tax base of$30,000 and pays a next $5,000. T has an average tax rate of a 10 percent. b. 15 percent. c. 20 percent. d. 10.83 percent. 5. x ofS2,500 on the first $25,000 and$750 on the e None of the above 6. Which one of the following statements is true? a. Tax credits reduce tax liability at the marginal tax rate. b. Both tax credits and tax deductions are offisets to taxable income. C Dollar for dollar, tax credits are more valuable than tax deductions d. The tax impact of an additional dollar of tax base is determined by multiplying by the average tax rate. “I can’t afford to earn more because it will throw me into a higher tax bracket and I will keep less than I do now after taxes.” e. B,an unnamed taxpayer, knows that her last dollar of income in the current year will be taxed at 10 percent. D, an unmarried taxpayer, knows that his last dollar of current year income will be taxed at 25 percent. Which of the following statements is not true taking into account the above assumptions? a D’s marginal tax rate is greater than B’s. b. The value of a $2,000 IRA deduction to D will be less than the same amount ー. contributed by B to an IRA c.I both parties suffer a $100,000 business loss that is fully deductible, the impact of the deductible loss will be greater on D’s return than on B’s return. d. B will pay 10 percent of her taxable income to the government e D will not pay 25 percent of his taxable income to the government & Before adjusted gross nicome can be computed, what following components must be computed a. Income b. Taxable income c. Gross income d. a and b e. a and c 9. What tax policy goal(s) best explaints) the progressive rate structure? a Tax revenue enhancement b. Horizontal equity c. Vertical equity d. Both b and c ook Air
5. Average tax rate = Total tax paid / Tax base
= ($2500 + $750) / $30000
= $3250 / $30000
The answer is d.