Calculate Mr. Lee's Nominal Tax Rate

What is Mr. Lee's nominal tax rate based on the information provided?

a. 25%

b. 75%

c. 33.33%

d. 10%

Answer:

By dividing the total tax paid by the taxable income and expressing it as a percentage, Mr. Lee's nominal tax rate is option c. 33.33%.

To calculate the nominal tax rate, we divide the total tax paid by the taxable income and express it as a percentage. In this case, Mr. Lee paid $30,000 in taxes and had a taxable income of $90,000.

So, the nominal tax rate is (30,000 / 90,000) x 100 = 33.33%. This means that 33.33% of Mr. Lee's taxable income went towards taxes.

The nominal tax rate represents the explicit tax burden as a percentage of the taxable income. It is important to note that this calculation does not take into account any deductions or exemptions that Mr. Lee might be eligible for, which could affect his effective tax rate. The nominal tax rate provides a simplified measure of the tax burden on a taxpayer based on their taxable income.