A Tax Dilemma Assignment 
BUSINESS MATH
A TAX DILEMMA
ASSIGNMENT 11.1
CASE STUDY 20.2 – PAGES 736 – 737
Rita just finished completing her educational requirements to become a dental hygienist. She has been offered jobs in two different cities and is trying to determine which one she should accept. Both employers offer similar benefits and working conditions, but the jobs are in two different states. Rita will move to the state in which she accepts a position.
The first position is in Pennsylvania. Rita would earn $50,000 a year, and she could purchase a starter duplex in the older part of the city for about $75,000. Property taxes equal about 3.5% of assessed value. Assessed value is normally 85% of market value. The state sales tax rate is 6% but does not apply to clothing or food among other items. State income taxes average 3%.
The other position is in Maryland. Rita would earn $65,000 a year, but a starter duplex would cost her $135,000. In that area, property taxes average about 4% of assessed value, and values are assessed at 60% of market value. The state sales tax is generally considered to be about 1% higher than in Pennsylvania because it applies to clothing as well as other purchases. Additionally, state income taxes average 1.5% higher in Maryland than in Pennsylvania.
1. What would be the difference in cost of living between the two locations based only on the differences in sales tax, income tax, and property tax? Assume $24,000 of taxable purchases for this exercise. (See page 707 as an example)
Tax
Pennsylvania
Maryland
Difference
Property
2231.25 3240 1008.75
Sales
840 960 120
State Income 50000 65000 15000
Penn: $50,000 Maryland: $65,000
Income tax: 3% Income tax: 4.5%
Prop tax : 3.5% Prop tax: 4%
Sales tax 6% Sales tax: 7%
Home: $75000 Home: $135,000
Sales tax: 24,000x0.035 = $840 24,000x0.040= $960
Income tax: 50,000*0.03 = $1500 65,000*0.045=$2925
Assssed value: 75000*0.85 = $63750 135000*0.60=$81000
Prop Tax: 63750 *
A TAX DILEMMA
ASSIGNMENT 11.1
CASE STUDY 20.2 – PAGES 736 – 737
Rita just finished completing her educational requirements to become a dental hygienist. She has been offered jobs in two different cities and is trying to determine which one she should accept. Both employers offer similar benefits and working conditions, but the jobs are in two different states. Rita will move to the state in which she accepts a position.
The first position is in Pennsylvania. Rita would earn $50,000 a year, and she could purchase a starter duplex in the older part of the city for about $75,000. Property taxes equal about 3.5% of assessed value. Assessed value is normally 85% of market value. The state sales tax rate is 6% but does not apply to clothing or food among other items. State income taxes average 3%.
The other position is in Maryland. Rita would earn $65,000 a year, but a starter duplex would cost her $135,000. In that area, property taxes average about 4% of assessed value, and values are assessed at 60% of market value. The state sales tax is generally considered to be about 1% higher than in Pennsylvania because it applies to clothing as well as other purchases. Additionally, state income taxes average 1.5% higher in Maryland than in Pennsylvania.
1. What would be the difference in cost of living between the two locations based only on the differences in sales tax, income tax, and property tax? Assume $24,000 of taxable purchases for this exercise. (See page 707 as an example)
Tax
Pennsylvania
Maryland
Difference
Property
2231.25 3240 1008.75
Sales
840 960 120
State Income 50000 65000 15000
Penn: $50,000 Maryland: $65,000
Income tax: 3% Income tax: 4.5%
Prop tax : 3.5% Prop tax: 4%
Sales tax 6% Sales tax: 7%
Home: $75000 Home: $135,000
Sales tax: 24,000x0.035 = $840 24,000x0.040= $960
Income tax: 50,000*0.03 = $1500 65,000*0.045=$2925
Assssed value: 75000*0.85 = $63750 135000*0.60=$81000
Prop Tax: 63750 *