Assume that Peter is a single parent who is in poverty. He receives food stamps and Medicaid. For every $100 that he earns, Peter loses $35 of his food stamp benefits and $20 in his Medicaid benefits. Also, Peter's income is taxed at a rate of 10 percent. Then, Peter's effective marginal tax rate is

Question

Quizplus · Accepted Answer

Peter's effective marginal tax rate is the sum of the lost benefits and the income tax rate: $35 (food stamps) + $20 (Medicaid) + $10 (10% income tax) = $65, which is 65 percent.

Assume That Peter Is a Single Parent Who Is in Poverty