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Unformatted text preview: and make Fergie indifferent between investing in the two bonds. (49) [LO3] Given the following tax structure, what minimum tax would need to be assessed on Shameika to make the tax progressive with respect to average tax rates? Taxpayer Salary Muni-Bond Interest Total Tax Mihwah 10,000 10,000 600 Shameika 50,000 30,000 ??? Mihwahs average tax rate is 6 percent. Average Tax Rate = = = 6% A 6 percent average tax rate on Shameikas $50,000 taxable income would result in $3,000 of tax (i.e., 6% x $50,000 = $3,000). Thus, Shameika must pay more than $3,000 tax (e.g., $3,001) for the tax structure to be progressive with respect to average tax rates. (50) [LO3] Using the facts in the previous problem, what minimum tax would need to be assessed on Shameika to make the tax progressive with respect to effective tax rates? Mihwahs effective tax rate is 3 percent....
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- Spring '10