In 2016 Joe earnings increased by $4,000 from the year before. There were no other changes...
In 2016 Joe earnings increased by $4,000 from the year before. There were no other changes in his
income, family (tax
filing) status, or deductions. There were no changes in the federal income tax
code either. As a result of this increase in earnings (and taxable income) Joe’s federal income taxes
increased by $1,000.
What is the marginal tax rate Joe faces? __________.
Explain.
Homework Answers
Marginal tax rate = Tax / Income * 100 = 1000 / 4000 * 100 = 25%
The marginal tax rate is the rate at which the last dollar earned is taxed by the government
When there is no change in tax rates/rules, then the marginal tax rate on last 4000 earned is the same as before and tax on extra 4000 will be as per the marginal tax rate
Extra Tax = Marginal tax rate * extra income
Add Answer to:
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