Question

Arlene is single and has taxable income of $18,000. Her tax liability is currently $2,236. She has the opportunity to earn an additional $5,000 if she accepts and completes a special project at work. There are no additional expenses to offset the $5,000 income. Consequently, Arlene will have a tax liability of $2,986 if she accepts the special project. Arlene has a marginal tax rate of

Answer 1

Marginal tax rate is 0.15 or 15%

Step-by-step explanation:

Given data:

Taxable income is $18000

Tax liability is $2236

Additional amount to offer is $5000

Future tax liability is $2986

we know that marginal tax rate is computed as

Marginal rate
`= (change\ in\ tax)/(change\ in taxable\ income)`

`= (2986- 2236)/(5000)`

`= (750)/(5000)`

Marginal tax rate is 0.15 or 15%