The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

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Andy's marginal tax rate is 20 percent because he pays 20 percent on income over $50,000. His average tax rate is 13 percent because he paid $9,000 in taxes on his total income, which is $70,000 (calculated as $5,000 on the first $50,000 and $4,000 on the remaining $20,000), resulting in an average rate of $9,000/$70,000 = 0.13 or 13 percent.

The Income Tax Requires That Taxpayers Pay 10 Percent on the First