When income is $15,000, the amount of income income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The marginal tax rate in this case is

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Quizplus · Accepted Answer

The marginal tax rate is calculated by dividing the change in taxes owed by the change in income. Here, taxes increase by $1,000 ($3,000 - $2,000) when income increases by $5,000 ($20,000 - $15,000). Thus, the marginal tax rate is $1,000 / $5,000 = 0.20, or 20 percent.

When Income Is $15,000, the Amount of Income Income Taxes