Question

Suppose there is a 20% tax on the first $15,000 of taxable income, a 30% tax on taxable income above $15,000 until $30,000, and a 40% tax on all taxable income above $30,000. There is a $3,000 exemption per person. What is the marginal tax rate for a single mother making $35,000 who has one child?

		20%
		30%
		31.70%
		40%

Answer 1

Marginal tax rate

The change in the tax payment divided by the change in income, or the percentage of additional dollars that must be paid in taxes. The marginal tax rate is applied to the highest tax bracket of taxable income reached

Marginal tax rate= change in taxes due/ change in taxable income

Mothers income is 35000 and earning over 30000 is called marginal tax rate . Now in question given that 40% tax on all taxable income above 30000 SO 35000 is also fall in 40% bracket SO

40% is marginal tax rate

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