Table 12-4
-Refer to Table 12-4. What is the average tax rate for a person who makes $130,000?
A)30%
B)40%
C)50%
D)60%

Question

Table 12-4 
-Refer to Table 12-4. What is the average tax rate for a person who makes $130,000?
A)30% 
B)40% 
C)50% 
D)60%

Quizplus · Accepted Answer

To calculate the average tax rate for a person who makes $130,000, we need to find the tax bracket that $130,000 falls into. From the table, we can see that $130,000 falls into the fourth tax bracket, which has a marginal tax rate of 37%. However, only the amount above $157,500 is taxed at that rate. The amount between $82,501 and $157,500 is taxed at a rate of 24%.

So, we can calculate the total tax liability as follows:

($82,500 * 0.22) + (($130,000 - $82,500) * 0.24) + (($157,500 - $130,000) * 0.32)

= $18,150 + $10,200 + $8,800

= $37,150

Therefore, the average tax rate for a person who makes $130,000 is:

($37,150 / $130,000) * 100%

= 28.5%

The closest answer is B, which is 40%. This is not the correct answer, but it is the closest choice available.

Table 12-4 -Refer to Table 12-4. What Is the Average Tax Rate