Question

Lars Osberg, a single taxpayer with a 35 percent marginal tax rate, desires health insurance. The health insurance will cost Lars $8,500 to purchase if he pays for it himself through the health exchange (Lars’s AGI is too high to receive any tax deduction for the insurance as a medical expense). Answer the following questions about this benefit. (Do not round intermediate computations. Round your final answer to the nearest whole dollar amount.)

a. What is the maximum amount of before-tax salary Lars would give up to receive health insurance from Volvo?

Answer 1

Answer:

The maximum amount of before-tax salary Lars would give up to receive health insurance from Volvo is $13,077

Explanation:

According to the given data we have the following:

health insurance benefit=$8,500

marginal tax rate= 35%

In order to calculate the maximum amount of before-tax salary Lars would give up to receive health insurance from Volvo, we would have to use the following formula:

before-tax salary=health insurance benefit

                                1-marginal rate

before-tax salary=$8,500

                               1-0.35

before-tax salary=$8,500

                               0.65

                          =$13,077

The maximum amount of before-tax salary Lars would give up to receive health insurance from Volvo is $13,077