Suppose a state has the following individual income tax structure.The first $20,000 that an individual earns is taxed at 5%. The next $30,000 is taxed at 10%. Any income exceeding $50,000 is taxed at 20%.Based on this tax structure, if a person's income is equal to $60,000, his average tax rate is equal to:
A)15%
B)10%
C)11.67%
D)20%

Question

​Suppose a state has the following individual income tax structure.The first $20,000 that an individual earns is taxed at 5%. The next $30,000 is taxed at 10%. Any income exceeding $50,000 is taxed at 20%.Based on this tax structure, if a person's income is equal to $60,000, his average tax rate is equal to:
A)​15%
B)​10%
C)​11.67%
D)​20%

Quizplus · Accepted Answer

First $20,000: 5% tax rate = $1,000 tax
Next $30,000: 10% tax rate = $3,000 tax
Remaining $10,000: 20% tax rate = $2,000 tax
Total tax paid = $6,000
Average tax rate = Total tax paid / Total income = $6,000 / $60,000 = 0.1 = 10%
Therefore, the answer is choice B).

​Suppose a State Has the Following Individual Income Tax Structure

Suppose a State Has the Following Individual Income Tax Structure