Suppose there are two people in a society: Sam and Jack. The federal tax law states that the first $20,000 of income is taxed at 10%, the next $20,000 is taxed at 20%, and income above that is taxed at 22%:

The federal government allows taxes paid to local governments to be deducted. Sam earns a gross income of $38,000 and pays $1,000 in local taxes out of his income.

Jack earns a gross income of $80,000 and pays $10,000 in local taxes out of his income.

Calculate the specific effect the deduction for local government taxes has on Sam's federal tax bill (how much will his taxes fall (in $)).

Answer rating: 100% (QA)

Calculate the average tax rate for Sam Sam gross income 38000 local ta... View the full answer