Assume individuals pay no tax on the first $15000 of income, and then pay 30% on income above that level

Answer :

A person pays no tax on the first $15000 of income

Tax rate from that point onwards is = 30 %

Earnings of the person in a given year = $50000

Therefore taxable income for the person = $(50000 - 15000) = $35000

Therefore total tax paid = 30 % of $35000 = $10500

Now formula for calculating average tax rate = (Total tax paid / Total income) * 100

Here total tax paid by the person is = $10500

And total income for the person in the given year = $50000

Average tax rate = ($10500 / $50000) * 100 = 21.0 %

Answer : The average tax rate is 21.0 %