Assume That in Year 1 You Pay an Average Tax

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000.In year 2,you pay an average tax rate of 25 percent on a taxable income of $30,000.Assuming no change in tax rates,the marginal tax rate on your additional $10,000 of income is:

A) 5 percent.
B) 12 percent.
C) 35 percent.
D) 42 percent.
Total taxes paid went up from $3500 and income went up $10,000.Therefore,the marginal tax rate was $3500/$10,000,or 35 percent.