At a taxable income of $120,000 Adam's income tax is $30,500.When his taxable income rises to $130,000 his income tax is $34,500.Based on this information,Adam's marginal tax rate is _____________ percent and his new average tax rate is ____________ percent.

Question

Quizplus · Accepted Answer

The marginal tax rate is calculated based on the increase in tax from the increase in income, which is ($34,500 - $30,500) / ($130,000 - $120,000) = $4,000 / $10,000 = 40%. The new average tax rate is calculated by dividing the new total tax by the new total income, which is $34,500 / $130,000 = 26.5%.

At a Taxable Income of $120,000 Adam's Income Tax Is