Mr Ohno Owns and Operates a Part-Time Service Business That

Essay

Mr. Ohno owns and operates a part-time service business that generates $80,000 annual taxable income. His federal tax rate on this income is 17%. Because of recent legislation, this rate will increase to 25% next year.
A. Based on a static forecast, how much additional revenue will the federal government collect from Mr. Ohno next year?
A. The federal government will collect $6,400 additional revenue ($80,000 * 8% rate increase).
B. How much additional revenue will the federal government collect if Mr. Ohno decides to work fewer hours and consequently earns only $50,000 next year?
B. The federal government will collect $1,100 less revenue ([$50,000 * 25%] - [$80,000 * 17%]).