Question

Arlene is single and has taxable income of $18,000. Her tax liability is currently $1,970 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 $2,570 if she accepts the special project. Arlene has a marginal tax rate of

Answer 1

12%

Step-by-step explanation:

Calculation for marginal tax rate

Using this formula

Marginal tax rate=Change in Tax / Change in Taxable Income

Let plug in the formula

Marginal tax rate=(2,570-1,970)/5,000

Marginal tax rate=600/5,000

Marginal tax rate=0.12*100

Marginal tax rate=12%

Therefore Arlene has a marginal tax rate of 12%