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Economics 1480 Answer key #7 Question 1: Marriage penalties This question relates to the marriage penalty. Suppose that the brackets for single and married filers are as given below: Marginal tax rate Single bracket Joint bracket 10% \$0-\$6,000 \$0-\$12,000 15% \$6,0000-\$27,950 \$12,0000-\$46,700 27% \$27,950-\$67,700 \$46,700-\$112,850 30% \$67,700-\$141,250 \$112,850-\$171,950 35% \$141,250-\$307,050 \$171,950-\$307,050 38.6% >\$307,050 >\$307,050 Note: This table provides marginal tax rates, not average tax rates. Thus, for an single individual with taxable income of \$11,000, the first \$6,000 is taxed at 10 percent and the remaining \$5,000 is taxed at 15 percent, and the total tax is \$600+\$750=\$1350. The marginal tax rate of 15 percent should NOT be applied to the entire \$11,000. Alan, who has adjusted gross income of \$25,000, is planning to marry Beth, who also has adjusted gross income of \$25,000. Cathy, with adjusted gross income of \$50,000, is planning to marry David, who is a graduate student and has no income. a) Compute the marriage penalty/bonus for each of these couples (for the purposes of this calculation, you can abstract from standard deductions and other features of tax code that depend upon filing status).

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