Miranda works 40 hours a week at a wage rate of $25. Thus, her total weekly income is $1000. On this income, she pays total taxes of $80.00. However, she calculates that on the last hour that she works, she pays $3.75. Her average tax rate is 8%. What is her marginal tax rate?

Question

Rosemary Norris

Business

26 October, 20:37

Miranda works 40 hours a week at a wage rate of $25. Thus, her total weekly income is $1000. On this income, she pays total taxes of $80.00. However, she calculates that on the last hour that she works, she pays $3.75. Her average tax rate is 8%. What is her marginal tax rate?

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Answers (1)

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Trace Coleman · Answer 1

15%

Explanation:

If Miranda works 40 hours a week at a wage rate of $25. and she however calculates that on the last hour that she works, she pays $3.75. then her marginal tax rate is derived as follows

The marginal tax rate is the incremental tax paid on incremental income.

From the scenario, we are given the following:

Weekly wage rate is $25.

Weekly tax pay is $3.75

Hence, Marginal tax rate can be computed as = $3.75 / $25 = 15%