Jurisdiction M imposes an individual income tax based on the following schedule.

Rate Income bracket
5% $-0- to $50,000
+ 8% $50,001 to $200,000
+ 12% $200,001 and above

Mrs. Hill has $200,000 taxable income. Determine the marginal tax rate for taxable income.

Question

Jurisdiction M imposes an individual income tax based on the following schedule.

Rate	Income bracket
5%	$-0- to $50,000
+ 8%	$50,001 to $200,000
+ 12%	$200,001 and above

Mrs. Hill has $200,000 taxable income. Determine the marginal tax rate for taxable income.

BlackTom AI · Accepted Answer

To determine the marginal tax rate, we must identify the rate that applies to the last dollar earned, i.e., the rate for income just above the current bracket boundary.
Option 1: 5.00% — This is the rate for the first bracket (0 to 50,000). It does not apply to income in the higher brackets, so it cannot be the marginal rate for 200,000.
Option 2: 8.00% — This rate applies to the 50,001 to 200,000 range. While Mrs. Hill’s income falls within this bracket, the marginal rate concerns the next dollar earned beyond the current bracket boundary, so 8% is not the marginal rate at 200,000.
Option 3: 8.33% — This value does not correspond to any bracket in the schedule and appears to be a distractor. Marginal rates come from the given bracket percentages, not from an average or blended figure.
Option 4: 12.00% — This is the rate that applies to income above 200,000 (the 200,001 and above bracket). Although 200,000 itself is within the 8% bracket, the next dollar earned would be taxed at 12%, making 12.00% the correct marginal rate for taxable income of 200,000.
Thus, the correct marginal tax rate is the rate applicable to income just beyond 200,000, which is 12.00%.

SP25-BL-BUS-A327-1377 Exam 1 Practice

Jurisdiction M imposes an individual income tax based on the following schedule. Rate Income bracket 5% $-0- to $50,000 + 8% $50,001 to $200,000 + 12% $200,001 and above Mrs. Hill has $200,000 taxable income. Determine the marginal tax rate for taxable income.

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