A country is considering two income tax rates. Geoffrey is comparing what his tax bill would be under each plan. Under plan A, h
e pays 5% on the first $10,000. The next $85,000 is taxed at a rate of 10%. Any money earned above $95,000 is taxed at 15%. He made $98,000 last year. Which statement below is correct? Plan A Tax Rates x $10,0005%$10,000 x $95,00010%x > $95,00015% Plan B Tax Rates
All levels of income
10%
CHOICES: He would pay approximately $350 more under plan B.He would pay approximately $1,925 more under plan B.He would pay approximately $5,700 more under plan A.He would pay approximately $4,900 more under plan A.
The total tax rate for each plan is computed below: Plan A= [5%(10000)]+[10%(85000)]+[(15%(3000)] Plan A= $9450 For Plan B, tax is computed at 10% across all earnings Plan B= 10%x(98000) Plan B= $9800 Difference = Plan B-Plan A=($9800-$9450) = $350 From the computed tax rate in each plan. Plan B will pay $350 more than Plan A.
