Question

Consider the following hypothetical income tax brackets for a married couple. Assume for simplicity there are no exemptions or deductions. Income Tax Rate ​$0-$20,000 5​% ​$20,000-$50,000 20 ​$50,000-$100,000 45 Over​ $100,000 55 Suppose the​ couple's income is ​$60 comma 000. What is the​ couple's marginal tax​ rate? The​ couple's marginal tax rate is 45 percent. ​(Enter your response as an​ integer.) What is their average tax​ rate? The​ couple's average tax rate is nothing percent. ​(Enter your response as an integer)

Answer 1

The marginal tax rate is 45%

The average tax rate = 19.17%

Step-by-step explanation:

Given:

Income Tax Rate ​

for income between $0 - $20,000 = 5​%

for income between ​$20,000 - $50,000 = 20%

for income between ​$50,000 - $100,000 = 45%

for income between Over​ $100,000 = 55%

Income of the couple = $60,000

Since,

The income of the couple lies in the range of $50,000 - $100,000

therefore,

the marginal tax rate is 45%

Now,

For the average tax rate

Tax charged

for income between $0 - $20,000 = 5% of $20,000 = $1000

for income between ​$20,000 - $50,000 i.e $30,000 = 20% of $30,000

= $6,000

for income between ​$50,000 - $100,000 ( i.e $60,000 - $50,000=$10,000 )

= 45% of $10,000

= $4500

Total tax charged = $1000 + $6,000 + $4500 = $11,500

Therefore,

The average tax rate =
`\frac{\textup{Total tax charged}}{\textup{Total income}}`

or

The average tax rate =
`\frac{\textup{11,500}}{\textup{60,000}}`

or

The average tax rate = 0.1917

or

The average tax rate = 0.1917 × 100% = 19.17%