Sally, a low-income worker, is asked by her supervisor to work extra hours and earn an extra $75 a week. Her taxes will increase by $10, and her government benefits will be reduced by $40. What is Sally's implicit marginal tax rate?

Question

Quizplus · Accepted Answer

Sally's implicit marginal tax rate is calculated by adding the increase in taxes ($10) and the reduction in benefits ($40), which totals $50. This $50 is then divided by the additional earnings of $75, resulting in an implicit marginal tax rate of 67%.

Sally, a Low-Income Worker, Is Asked by Her Supervisor to Work