1)

Country M levies a 10 percent excise tax on the retail price of any automobile purchased in the country. This year, the aggregate purchase price subject to tax was $8.5 million, so current year revenue was $850,000. Country M plans to increase the tax rate next year to 11 percent.

Required:

1. Compute next years excise tax revenue assuming next years tax base equals the current year base.
2. Compute next years excise tax revenue assuming next years tax base increases to $9.8 million.
3. Compute next years excise tax revenue assuming next years tax base decreases to $7.5 million.

2)

Mrs. King, a single taxpayer, earns a $62,000 annual salary and pays 15 percent in state and federal income tax. If tax rates increase so that Mrs. Kings annual tax rate is 20 percent, how much additional income must she earn to maintain her after-tax disposable income?

3)

Mr. and Mrs. Jerald own a dry cleaning business that generates $162,750 taxable income each year. For the past few years, the couples federal tax rate on this income has been 32 percent. Congress recently increased the tax rate for next year to 40 percent.

Required:

1. Based on a static forecast, how much additional revenue will the federal government collect from Mr. and Mrs. Jerald next year?
2. How much additional revenue will the government collect if Mr. and Mrs. Jerald respond to the rate increase by working harder and earning $177,750 next year?
3. How much additional revenue will the government collect if Mr. and Mrs. Jerald respond to the rate increase by working less and earning only $147,750 next year?

4)

Jurisdiction B levies a flat 7 percent tax on the first $5 million of annual corporate income.

Required:

1. Jersey Inc. generated $2.8 million income this year. Compute Jerseys income tax and determine its average and marginal tax rate on total income.
2. Leray Inc. generated $7.6 million income this year. Compute Lerays income tax and determine Lerays average and marginal tax rate on total income.
3. What type of rate structure does Jurisdiction B use for its corporate income tax?

5)

Government G levies an income tax with the following rate structure:

Percentage Rate			Bracket
	6	%	Income from 0 to $30,000
	10		Income from $30,001 to $70,000
	20		Income from $70,001 to $200,000
	28		Income in excess of $200,000

Required:

1. Taxpayer As taxable income is $153,500. Compute As tax and average tax rate. What is As marginal tax rate?
2. Taxpayer Bs taxable income is $461,000. Compute Bs tax and average tax rate. What is Bs marginal tax rate?

6)

Country A levies an individual income tax with the following rate structure:

Percentage Rate			Bracket
	10	%	Income from 0 to $20,000
	15		Income from $20,001 to $75,000
	25		Income from $75,001 to $160,000
	30		Income in excess of $160,000

Required:

1. Mr. Levis taxable income is $36,400. Compute his tax and average tax rate. What is Mr. Levis marginal tax rate?
2. Ms. Jinns taxable income is $218,400. Compute her tax and average tax rate. What is Ms. Jinns marginal tax rate?