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# Earlier, the tax laws of a country required one of pay flat 20% of one

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Senior PS Moderator
Joined: 26 Feb 2016
Posts: 3191
Location: India
GPA: 3.12
Earlier, the tax laws of a country required one of pay flat 20% of one  [#permalink]

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25 Nov 2017, 12:18
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Difficulty:

55% (hard)

Question Stats:

57% (02:30) correct 43% (02:21) wrong based on 30 sessions

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Earlier, the tax laws of a country required one of pay flat 20% of one's income. Recently, the concept of progressive tax was implemented and one now needs to pay 30% income tax on the part of one's income above $40000. Jack paid the same amount of tax this year although he earned$10000 more than he did the previous year. What was Jack's income this year?

A. $70000 B.$80000
C. $90000 D.$100000
E. $120000 Source: Experts Global _________________ You've got what it takes, but it will take everything you've got Senior SC Moderator Joined: 22 May 2016 Posts: 2038 Earlier, the tax laws of a country required one of pay flat 20% of one [#permalink] ### Show Tags 25 Nov 2017, 15:26 1 1 pushpitkc wrote: Earlier, the tax laws of a country required one of pay flat 20% of one's income. Recently, the concept of progressive tax was implemented and one now needs to pay 30% income tax on the part of one's income above$40000. Jack paid the same amount of tax this year although he earned $10000 more than he did the previous year. What was Jack's income this year? A.$70000
B. $80000 C.$90000
D. $100000 E.$120000

Source: Experts Global

Last year Jack paid taxes at a flat rate of 20 percent of income.

This year he paid exactly the same dollar amount in taxes, at a rate of 30 percent for income greater than $40,000, AND he earned$10,000 more this year.

Let x = this year's income
Last year's taxable income = (x-10,000)
This year's taxable income = (x-40,000)

$$.20(x - 10,000) = .30(x - 40,000)$$
$$.20x - 2,000 = .30x - 12,000$$
$$.10x = 10,000$$
$$x = 100,000$$

Check:
Last year, on $90,000, Jack paid (.20)($90,000) = $18,000 This year, on$100,000, he paid (.30)($60,000) =$18,000. That's a match.

He earned $100,000 this year. Answer D _________________ ___________________________________________________________________ For what are we born if not to aid one another? -- Ernest Hemingway Intern Joined: 16 Oct 2017 Posts: 30 Location: Ireland Concentration: Healthcare, Finance Earlier, the tax laws of a country required one of pay flat 20% of one [#permalink] ### Show Tags 26 Nov 2017, 03:15 [quote="pushpitkc"]Earlier, the tax laws of a country required one of pay flat 20% of one's income. Recently, the concept of progressive tax was implemented and one now needs to pay 30% income tax on the part of one's income above$40000. Jack paid the same amount of tax this year although he earned $10000 more than he did the previous year. What was Jack's income this year? A.$70000
B. $80000 C.$90000
D. $100000 E.$120000

Lets i be the amount of money Jack earned last year, i + 10,000 earned this year. Progressive tax formula on wealthy looks like this:
0.3( income - 40,000) ; and taxes previous year = taxes this year.

$$0.2i = 0.3(i - 40,000 + 10,000)$$
$$0.2i = 0.3i - 30,000 * 0.3$$
$$-0.1i = - 9,000$$
$$i = 90,000$$

i + 10,000 earned this year => $90,000 +$10,000 = \$100,000
Earlier, the tax laws of a country required one of pay flat 20% of one &nbs [#permalink] 26 Nov 2017, 03:15
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