Question

At a taxable income of $80,000 adam's income tax is $18,400. when his taxable income rises to $90,000 his income tax is $21,000. based on this information, adam's marginal tax rate is _____________ percent and his new average tax rate is ____________ percent. 3.8; 23.0 23; 26.0 26; 23.3 18; 24.0 21; 23.3

Answer 1

The Marginal Tax Rate is computed by:

Change in total tax paid

Divided by

Change in income

So in the problem:

21000 – 18400

Divided by

90000 – 80000

= 2600 / 10000

= 0.26, multiply this by 100% to get the percentage

= 26%

Average Tax Rate:

Total tax paid

Divided by

Income

= 21000 / 90000

= 0.2333333, multiply this by 100% to get the percentage

= 23.3%

Therefore, the answer is 26; 23.3.