Suppose the income tax rate is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on all income above $70,000. Family A has income of $100,000 while Family B has income of $40,000. The marginal tax rates faced by the two families are

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Family A, with $100,000 income, falls into the 40% marginal tax bracket for income above $70,000. Family B, with $40,000 income, falls into the 20% marginal tax bracket for income between $30,000 and $50,000.

Suppose the Income Tax Rate Is 0 Percent on the First