Question

Suppose the tax rate on the first $10,000 income is 0 percent; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $30,000; and 40 percent on any income over $80,000. Family A has income of $50,000. What is the marginal and average tax rate for Family A?a. Family A: marginal - 20 percent; average - 10 percent; Family B: marginal - 40 percent; average - 23 percent. b. Family A: marginal - 20 percent; average - 15 percent; Family B: marginal - 40 percent; average - 20 percent. c. Family A: marginal - 10 percent; average - 10 percent; Family B: marginal - 30 percent; average - 30 percent. d. Family A: marginal - 20 percent; average - 20 percent; Family B: marginal - 40 percent; average - 40 percent.

Answer 1

Answer:

Th answer is: Marginal tax rate for Family A is 20%, average tax rate is 12%. There is no Family B in the question.

Explanation:

Family A's tax rate are as follows:

Income                             Tax rate

up to $10,000                       0%

$10,000 to $30,000           10%  

$30,000 to $50,000          20%

$50,000 to $80,000          30%

over $80,000                      40%

Since Family A's income is $50,000, their marginal tax rate is 20%, and its average tax rate is = [($20,000 x 10%) + ($20,000 x 20%) / $50,000] = ($2,000 + $4,000) / $50,000 = $6,000 / $50,000 = 12%