Please see attachment
Income Tax Exercise For this exercise you will compute the tax liability for three example families under four different (Clinton, Bush, Obama and 2018) sets of tax laws, computing a total of 12 tax liabilities and effective tax rates to compare. I recommend you approach this assignment using Excel for the analysis. · You will calculate the tax liability for each applying 4 different tax brackets, rates, personal exemption, and standard deduction values (these can be found in the table on the next two pages). We are making the simplifying assumption that each of the examples you are looking at will be taking the standard deduction. In practice, roughly two-thirds of tax filing units take the standard deduction. · In addition to your analysis reporting the 12 tax liabilities, I would like you to write a two-paragraph response. In the first paragraph discuss how the different families were affected by the different sets of tax policies. In the second, address which of the four tax policies seems most appropriate given our current economic and budget circumstances. Description of the three families /tax units: · Family A (makes just too much to qualify for any EITC): · Family of four, married parents filing jointly with two children · Total income is $70,000 · No adjustments · Family B: · Family of two, one parent and one child · Total income is $82,000 · Adjustments for student loan interest and IRA contribution sum to $7,000 · Family C: · Family of one, single filer · Total income is $500,000 · No adjustments Tax Parameters Under Clinton Administration Under Obama Administration Under Bush Administration Taxable Income Marginal Tax Rate Taxable Income Marginal Tax Rate Taxable Income Marginal Tax Rate Over But not over Over But not over Over But not over Single Single Single 0 8,925 0.10 0 8,500 0.10 0 34,500 0.15 8,925 36,250 0.15 8,500 34,500 0.15 34,500 83,600 0.28 36,250 87,850 0.25 34,500 83,600 0.25 83,600 174,400 0.31 87,850 183,250 0.28 83,600 174,400 0.28 174,400 379,150 0.36 183,250 398,350 398,350 400,000 0.33 0.35 174,400 379,150 0.33 379,150 --- 0.396 400,000 --- 0.396 379,150 --- 0.35 Married Filing Jointly Married Filing Jointly Married Filing Jointly 0 17,850 0.10 0 17,000 0.10 0 57,650 0.15 17,850 72,500 0.15 17,000 69,000 0.15 57,650 139,350 0.28 72,500 146,400 0.25 69,000 139,350 0.25 139,350 212,300 0.31 146,400 223,050 0.28 139,350 212,300 0.28 212,300 379,150 0.36 223,050 398,350 398,350 450,000 0.33 0.35 212,300 379,150 0.33 379,150 --- 0.396 450,000 --- 0.396 379,150 --- 0.35 Head of Household Head of Household Head of Household 0 12,750 0.10 0 12,150 0.10 0 46,250 0.15 12,750 48,600 0.15 12,150 46,250 0.15 46,250 119,400 0.28 48,600 125,450 0.25 46,250 119,400 0.25 119,400 193,350 0.31 125,450 203,150 0.28 119,400 193,350 0.28 193,350 379,150 0.36 203,150 398,350 398,350 425,000 0.33 0.35 193,350 379,150 0.33 379,150 --- 0.396 425,000 --- 0.396 379,150 --- 0.35 Standard Deduction Standard Deduction Standard Deduction Single: 5,800 Single: 5,800 Single: 5,800 Married Filing Jointly: 9,650 Married Filing Jointly: 11,600 Married Filing Jointly: 11,600 Head of Household: 8,500 Head of Household: 8,500 Head of Household: 8,500 Personal Exemption: 3,700 Personal Exemption: 3,700 Personal Exemption: 3,700 Source: Tax Foundation The personal exemption for 2018 is eliminated. 1