5 Given the following tax structure what minimum tax would n

5 Given the following tax structure, what minimum tax would need to be as respect tor average tax rates? sessed on Shameika to make the tax progressive with 0.5 points Muni-Bond Tota Tax Hi-ah $10.500; 5,000 42 Taxpa Salary Interest T Shaneika $51,500 20,000 77 elook Print References

Solution

Mihwah’s average tax rate is 4 percent:

Average Tax Rate = Total Tax / Taxable Income = $420 / $10,500 = 4%

A 4 percent average tax rate on Shameika’s $51,500 taxable income would result in $2,060 of tax (i.e., 4% x $51,500 = $2,060). Thus, Shameika must pay more than $2,060 tax for the tax structure to be progressive with respect to average tax rates.

Minimum tax = $2,060