For a person who is in the 35% marginal tax bracket,$1,000 of tax-exempt income is equivalent to over $1,500 of income that is subject to tax.

Question

Quizplus · Accepted Answer

This is because for a person in the 35% marginal tax bracket, $1,000 of tax-exempt income would have been subject to $350 in taxes if it was taxable income. Therefore, the equivalent taxable income that would result in a $350 tax liability is $1,500 [$1,000/(1-0.35)].

For a Person Who Is in the 35% Marginal Tax