Inflation and Taxes Taxes Taxable income is the amount of income for which the US government will apply taxes. This would be your total income minus any expenses, exemptions, or deductions. The Marginal Tax Rate (aka the derivative of the tax function) is the amount of tax that is applied solely to the income from the bracket. The Tax Brackets and associated Marginal Tax Rates for 2019 income is given below. Marginal Tax Rate Single Taxable Income Married Filing Jointly Taxable Income 10% $0 – $9, 700 $0 – $19,400 12% $9,701 - $39, 475 $19,401 - $78,950 22% $39, 476 - $84, 200 $78,951 - $168,400 24% $84, 201 - $160, 725 $168,401 - $321, 450 32% $160, 726 - $204,100 $321, 451 - $408, 200 35% $204, 101 – $510,300 $408,201 - $612, 350 37% $510, 301+ $612,351+ Problems 1. Create a graph of the marginal tax function for single payer. 2. Find the piecewise function that models the tax function for single payer. 3. The average salary in Seattle is about $75,000 per year. If this amount is taxable income, find the amount of taxes the average Seattleite will pay as a single filer. 4. It is unrealistic that a person pays taxes on their total income. Most of the time exemptions and deductions are applied. These deductions can be itemized or one can apply a standard deduction. In 2018, the standard deduction is $12,200 for single filers. If the Seattle single filer applies the standard deduction, how much will they pay in taxes? 5. In 2016 Howard Shultz was paid $21.6 million as CEO of Starbucks. How much would he be taxed if this was all taxable income? Michael Bloomber's net worth is about $50 billion. Suppose he has only half of that invested in accounts that earn the minimum interest rate of 1.5% determine by the fed. (a) How much would he earn in a year? (b) If all of those earnings are taxable income, how much would be pay in taxes? (c) Elizabeth Warren has propose an Ultra-Millionaire Tax that would tax the richest Americas. It would apply only to households with a net worth of $50 million or more?roughly the wealthiest 75,000 households or top 0.1%. Households would pay an annual 2% tax on every dollar of net worth above $50 million and a 6% tax on every dollar of net worth above $1 billion. Assuming this tax plan, how much would Michael Bloomberg have to pay in taxes? 6. Assuming that the top 0.1% (75,000 households) all have a net worth of $50 million (which is a huge un- derestimate i.e. see Bloomberg above), estimate the amount of additional revenue that the US government would receive if Warren's tax plan was introduced.
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