You are offered a choice between paying a flat tax (one rate on all income) of 20% on $44,000 of income and paying a graduated tax of the following schedule on the same income. Schedule: 10% on the first $25,000; 30% on your income over $25,000. Which is better for you?

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Mathematics

Camden Horne

20 July, 23:23

You are offered a choice between paying a flat tax (one rate on all income) of 20% on $44,000 of income and paying a graduated tax of the following schedule on the same income. Schedule: 10% on the first $25,000; 30% on your income over $25,000. Which is better for you?

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Gunner Daniel · Answer 1

It depends on your income and your expectation of future income. These choices often come up in student loans. If you come out say, for example, as a social worker and your expected annual income is going to start off as $15,000 and not rise above $30,000-$35,000 you might take the graduated. But if you are graduating from medical school as a neurosurgeon, you might want the flat rate because while you won't make much while in your residency, once you are on your own and can call your own fees and driving a Porshe, you won't want something based on your income.