Question

Suppose the government imposes a tax of 10 percent on the first $20,000 of income, 20 percent on the next 40,000 of income and 30 percent on income above $60,000. For a person whose income is $90,000, the tax liability is _________ and the marginal tax rate is __________.

Answer 1

For a person whose income is $90,000, the tax liability is $9,000 and the marginal tax rate is 30%.

Step-by-step explanation:

total tax liability for someone earning $90,000:

$20,000 x 10% = $2,000

$40,000 x 20% = $8,000

$30,000 x 30% = $9,000

total tax liability = $19,000

A taxpayer's marginal tax rate, refers to the rate at which every additional dollar of income will be taxed.