Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000 . Calculate the marginal tax rate and the average tax rate for a person who earns $100,000


The marginal tax rate would be 30 percent because the person earns more than $40,000 . The average tax rate would be 24%. The person pays $2,000 on the first $20,000 of income, $4,000 on the next $20,000 in income, and $18,000 on the remaining $60,000 of income. $24,000/$100,000=24%.

Economics

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