Question

In 2009, the total personal income in Virginia was estimated to be about $347 billion. The state collected about $8.66 billion in individual income taxes. What flat tax rate could Virginia have used to collect the same amount of individual income tax revenue? Round your answer to the nearest tenth of a percent.

Answer 1

If we are talking about a flat tax rate, it means that it will apply equally in all amount of the personal income.

This means that if we apply this tax rate to the total, we should end up with the total collected.

Let r be the tax rate, then:

$\begin{gathered} (347\, billion)\cdot r=8.66\, billion \\ r=\frac{8.66billion}{347billion} \\ r=\frac{8.66\, \cancel{\,billion}}{347\cancel{\,billion}}=0.024965\ldots=2.4965\ldots\%\cong2.5\% \end{gathered}$

Thus, the tax could have been 2.5%.