The Tappan family has taxable income of $50,000. Tax tables indicate that the first $20,000 of income will be taxed at 24% and all income above $20,000 will be taxed at 30%. What are the Tappan's marginal and average tax rates?

Question

Quizplus · Accepted Answer

The Tappan's marginal tax rate is the tax rate on the last dollar earned, which is 30%. 
To calculate the average tax rate, we need to find the total tax paid as a percentage of total income. 
For the first $20,000 of income, they pay 24% in taxes, which is $4,800. 
For the remaining income of $30,000, they pay 30% in taxes, which is $9,000. 
Their total tax paid is $13,800, which is 27.6% of their total income. 
Therefore, the Tappan's average tax rate is 27.6%.

The Tappan Family Has Taxable Income of $50,000