Suppose the income tax rate is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on all income above $70,000. Family A has income of $82,000 while Family B has
income of $37,000. What are the marginal tax rates faced by the two families?
What will be an ideal response?
Since Family A's income ($82,000 ) is in the last bracket, their marginal tax rate is 40 percent. Since Family B's income ($37,000 ) is in the third bracket, their marginal tax rate is 20 percent.
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