James earns income of $90,000 per year. His average tax rate is 40percent. James paid $5,500 in taxes on the first $40,000 he earned. What was the marginal tax rate on the rest of his income?

Question

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James paid $5,500 on the first $40,000, which is an average tax rate of 13.75% on that portion. To find the marginal tax rate on the remaining $50,000, we calculate the total tax paid ($90,000 * 40% = $36,000) minus the $5,500 already paid, which is $30,500. The marginal tax rate is $30,500 / $50,000 = 61%.

James Earns Income of $90,000 Per Year