Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $50,000? a. 12 percent and 20 percent, respectivelyb. 12 percent and $50,000, respectivelyc.$6,000 and 12 percent, respectivelyd.$6,000 and 20 percent, respectively

Question

Rylie Hayden

Business

24 February, 12:04

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $50,000? a. 12 percent and 20 percent, respectivelyb. 12 percent and $50,000, respectivelyc.$6,000 and 12 percent, respectivelyd.$6,000 and 20 percent, respectively

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Danika Mccormick · Answer 1

total tax liability = $6,000

marginal tax rate = 20%

Explanation:

total tax liability = ($4,000 x 10%) + [ ($50,000 - $40,000) x 20%] = $4,000 + $2,000 = $6,000

The marginal tax rate is the tax rate applicable to an additional dollar of income. Since the $50,000 income falls into the second bracket, the marginal tax rate is 20%.