4.Mr. and Mrs.

J own a dry cleaning business that generates P125,000 taxable

income each year. For the past few years, the couple’s federal tax rate on this
income has been 32 percent. Congress recently increased the tax rate for next year
to 40 percent.
a. Based on a static forecast, how much additional revenue will the
federal government collect from Mr. and Mrs. J next year?
b. How much additional revenue will the government collect if Mr. and
Mrs. J respond to the rate increase by working harder and earning
P140,000 next year?
c. How much additional revenue will the government collect if Mr. and
Mrs. J respond to the rate increase by working less and earning only
P110,000 next year?

5.Jurisdiction B levies a flat 7 percent tax on the first P5 million of annual corporate
income.
a. Jersey Inc. generated P3.9 million income this year. Compute Jersey’s
income tax and determine its average and marginal tax rate on total
income.
6.Government G levies an income tax with the following rate structure:
Percentage Rate Bracket
6% Income from –0– to P30,000
10 Income from P30,001 to P70,000
20 Income from P70,001 to P200,000
28 Income in excess of P200,000
a. Taxpayer A’s taxable income is P119,400. Compute A’s tax and
average tax rate. What is A’s marginal tax rate?
b. Taxpayer B’s taxable income is P383,900. Compute B’s tax and
average tax rate. What is B’s marginal tax rate?

7.Refer to Government G’s rate structure described in the preceding problem.

Taxpayer O earns P50,000 annually during years 1 through 10. Taxpayer P earns
P20,000 annually during years 1 through 5 and P80,000 annually during years 6
through 10.
a. How much total income does each taxpayer earn over the 10-year
period?