Question

Kathy works full time during the day as an economist and faces an 80 percent marginal tax rate. If Kathy were to get an offer to work a second job in the evenings doing consulting work for a local business for $10,000 per year, how much of this additional income would she be able to keep as net pay after taxes? a. $10,000 b. $6,000 c. $2,000 d. $4,000

Answer 1

c. $2,000

Step-by-step explanation:

Kathy is subjected to a 80 percent marginal rate, which means that 80 percent of her income is taxed. We can find what she would keep as net pay after taxes with this simple formula:

$10,000 x 80% = $2,000