The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

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Karen's marginal tax rate is 20 percent because this is the rate she pays on any income over $40,000. To find her average tax rate, we calculate the total tax paid ($6,000) as a percentage of her total income. Since she paid $6,000, which is $2,000 more than what she would have paid on the first $40,000 (10% of $40,000 = $4,000), she must have earned $10,000 at the 20% rate (since $2,000 is 20% of $10,000). Therefore, her total income was $50,000 ($40,000 + $10,000), and her average tax rate is $6,000/$50,000 = 12%.

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