Jan has an income of $30,000 and pays $4,500 in taxes. When Jan's income rises to $40,000, her tax bill rises to $6,500. What is Jan's marginal tax rate?

Question

Quizplus · Accepted Answer

The marginal tax rate is calculated by the change in taxes divided by the change in income. The change in taxes is $6,500 - $4,500 = $2,000, and the change in income is $40,000 - $30,000 = $10,000. Therefore, the marginal tax rate is $2,000 / $10,000 = 0.20 or 20 percent.

Jan Has an Income of $30,000 and Pays $4,500 in Taxes