Assume that you have a marginal tax rate of 28 percent, a state income tax rate of 4 percent, and have a city income tax rate of 1 percent. The tax for Social Security and Medicare is 7.65 percent. What would be the effective marginal tax rate on your last dollar of earnings?

Question

Quizplus · Accepted Answer

The effective marginal tax rate on the last dollar earned would be the total percentage of taxes paid on that dollar. So, the effective marginal tax rate would be the sum of the federal tax rate (28%), state tax rate (4%), city tax rate (1%) and the Social Security/Medicare tax rate (7.65%) = 40.65%. Therefore, the correct answer is D.

Assume That You Have a Marginal Tax Rate of 28