If personal income up to and including $30,000 is not taxed,income of $30,001 to $60,000 is taxed at 10%,and income over $60,000 is taxed at 25%,then a family earning an income of $100,000 will pay a marginal tax rate of _____%.

Question

Quizplus · Accepted Answer

The income of the family is above $60,000, so the income over $60,000 will be taxed at 25%. 
Income over $60,000 = $100,000 - $60,000 = $40,000
Tax on income over $60,000 = 25% of $40,000 = $10,000
Tax on income from $30,001 to $60,000 = 10% of ($60,000 - $30,001) = 10% of $29,999 = $2,999.90
Total tax paid = Tax on income over $60,000 + Tax on income from $30,001 to $60,000 = $10,000 + $2,999.90 = $12,999.90
Effective tax rate = Total tax paid / Income x 100%
Effective tax rate = $12,999.90 / $100,000 x 100% = 13%
Therefore, the marginal tax rate for the family earning an income of $100,000 will be 25%.

If Personal Income Up to and Including $30,000 Is Not