If Lex's income increases from $30,000 to $40,000 and his tax liability increases from $6,000 to $10,000, which of the following is true?
A) His marginal tax rate is 20 percent in this range.
B) His average tax rate is 40 percent at his new income level of $40,000.
C) He faces a regressive tax in this income range.
D) He faces a progressive tax in this income range.

Question

Quizplus · Accepted Answer

The tax liability has increased by a greater percentage than the increase in income, indicating that Lex is facing a progressive tax. His marginal tax rate cannot be determined solely from this information, and his average tax rate is not necessarily 40 percent (it would be calculated by dividing total tax liability by total income). Regressive taxes would have a lower tax rate for higher incomes.

If Lex's Income Increases from $30,000 to $40,000 and His