At a taxable income of $80,000 Adam's income tax is $18,400.When his taxable income rises to $90,000 his income tax is $21,000.Based on this information,Adam's marginal tax rate is _____________ percent and his new average tax rate is ____________ percent.

Question

Quizplus · Accepted Answer

Marginal tax rate is the rate at which the last dollar earned is taxed. Therefore, the difference in tax paid divided by the difference in income would give us the marginal tax rate.

($21,000 - $18,400) / ($90,000 - $80,000) = 0.35 = 35%

To calculate the new average tax rate, we take the total tax paid and divide it by the new taxable income.

$21,000 / $90,000 = 0.2333 = 23.33%

Therefore, the answer is (C) 26 and 23.3.

At a Taxable Income of $80,000 Adam's Income Tax Is