Dr. Rand earns $420,000 per year. He is charged a 20% tax on the first $100,000 he earns. He is charged a 30% tax for any income he earns between $100,000 and $250,000, and he is charged a 38% tax on anything he earns over $250,000. How do we find his marginal tax rate?
a. Add 20% of $100,000, 30% of $150,000, and 38% of $170,000, and then divide the total by $420,000.
b. Look at the percentage rate he would pay on his last dollar of income, which is 38%.
c. Look at the percentage rate he would pay on $1, which is 20%.
d. Add 20%, 30%, and 38%, divide by three, and multiply that amount times $420,000.
b. Look at the percentage rate he would pay on his last dollar of income, which is 38%.
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