Scenario 12-4
A taxpayer faces the following tax rates on her income:
20 percent of the first $40,000 of her income;
30 percent of all her income above $40,000.
-Refer to Scenario 12-4. The taxpayer faces a marginal tax rate of

Question

Quizplus · Accepted Answer

The taxpayer faces a marginal tax rate of 20% only on the portion of her income that falls within the first tax bracket ($0-$40,000). Therefore, when her income rises from $30,000 to $30,001, she will only incur an additional 20% tax on the amount above $30,000, which is $1. This results in a marginal tax rate of 20%.

Scenario 12-4 A Taxpayer Faces the Following Tax Rates on Her Income