The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

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Emily's marginal tax rate is 20 percent because she pays 20 percent on income over $40,000. Her average tax rate is calculated by dividing total taxes paid ($9,000) by her total income. If she paid $9,000 in taxes, she must have earned $60,000 ($4,000 from the first $40,000 at 10% and $5,000 from the remaining $20,000 at 20%). Thus, her average tax rate is $9,000/$65,000 = 13.8 percent.

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