When is the marginal tax rate for a taxpayer necessarily equal to his average tax rate
A)only when he has a very high income
B)only when he has a very low income
C)only when he is self-employed
D)only when he invests in a retirement plan

Question

Quizplus · Accepted Answer

The marginal tax rate refers to the tax rate paid on the last dollar earned, whereas the average tax rate is the total tax paid divided by total income. When a taxpayer has a very low income, their tax liability may be entirely or mostly covered by exemptions, deductions, and credits, resulting in a low average tax rate. At the same time, their marginal tax rate may also be low or zero because they are in a low tax bracket where income is taxed at a lower rate or not taxed at all. Therefore, the marginal tax rate is equal to the average tax rate when the taxpayer's income is insufficient to move them into a higher tax bracket, making it the correct choice in this scenario. The other options (A, C, and D) are incorrect and irrelevant.

When Is the Marginal Tax Rate for a Taxpayer Necessarily