Suppose a country imposes a lump-sum tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?
A)0%
B)10%
C)More than 10%
D)The marginal tax rate cannot be determined without knowing the entire tax schedule.

Question

Quizplus · Accepted Answer

The marginal income tax rate is the rate at which the last dollar of income is taxed. A lump-sum tax is a fixed amount and does not change with the level of income, meaning the marginal tax rate is 0%.

Suppose a Country Imposes a Lump-Sum Tax of $5,000 on Each