Question

If an individual pays an additional $0.30 in taxes as a result of a $1.00 increase in income, then that individual must have a(n) __________ tax rate of 30 percent.

Answer 1

Answer:

Marginal

Explanation:

Individuals are required to pay taxes on the income earned. Marginal tax rate is the rate applicable on the additional income earned. This rate increase with the increase in income. The aim of marginal tax rate is to tax individuals based on their income. Higher the income, higher will be marginal tax rate. So, lower income group would be taxed at a lower rate.

Here, additional taxes of $0.30 for a $1 increase in income means the individual's marginal tax rate is 30% that is 0.3/1 × 100.