If you would have to pay $5,000 in taxes on $25,000 taxable income and $7,000 in taxes on $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

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The marginal tax rate on the additional $5,000 of income is calculated by the increase in tax ($7,000 - $5,000 = $2,000) divided by the increase in income ($30,000 - $25,000 = $5,000), which equals 40% ($2,000 / $5,000). The average tax rate at the $30,000 income level is the total tax paid ($7,000) divided by the total income ($30,000), which equals about 23% ($7,000 / $30,000).

If You Would Have to Pay $5,000 in Taxes on $25,000