1. GOALS BUSINESS MATH© Thomson/South-WesternLesson 2.4Slide 1 2.4State and City Income Taxes Calculate state and city income taxes using a flat tax rate Calculate state and city income taxes using a graduated tax rate table

2. BUSINESS MATH© Thomson/South-WesternLesson 2.4Slide 2 State and City Flat Income Taxes Some states and cities tax personal income as a percent of federal taxable income. Some tax personal income as a percent of gross income. Some use a fixed, or flat tax rate no matter how much taxable income a person has. That is, the tax rate is the same for every person, regardless of the amount of income they earn in a year.

3. BUSINESS MATH© Thomson/South-WesternLesson 2.4Slide 3 State and City Graduated Income Taxes Some states and cities use a graduated income tax rate like the federal government. In a graduated tax system, the tax rate gets higher as taxable income gets larger.

4. BUSINESS MATH© Thomson/South-WesternLesson 2.4Slide 4 Sample Graduated Tax Rate Schedule For taxable income Over —But not over —The tax is — $ -0-$8,0002% of taxable income 8,00016,000$160plus 3% of taxable income over $8,000 16,00024,000$400plus 4% of taxable income over $16,000 24,00032,000$720plus 5% of taxable income over $24,000 32,00040,000$1,120plus 6% of taxable income over $32,000 40,00048,000$1,600plus 7% of taxable income over $40,000 48,00056,000$2,160plus 8% of taxable income over $48,000 56,00064,000$2,800plus 9% of taxable income over $56,000