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

Ms. Smith has $40,000 taxable income. Determine the marginal tax rate.

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

Ms. Smith has $40,000 taxable income. Determine the marginal tax rate.

BlackTom AI · Accepted Answer

The question presents a progressive tax schedule where different portions of income are taxed at different rates.
Option 1: 5.00% — This corresponds to the rate applied to the first $0 to $50,000 bracket. Since Ms. Smith has $40,000 of taxable income, her entire income falls within this lowest bracket, so the marginal rate is 5%. 
Option 2: 8.00% — This would apply only if any portion of income fell into the $50,001 to $200,000 bracket. Because $40,000 is below $50,001, there is no income taxed at 8% for this taxpayer, so this option is incorrect for the given income. 
Option 3: 8.33% — This rate is not present in the schedule; it would imply a fractional or blended calculation, which is not how the marginal rate is determined in a tiered bracket system. Therefore, this is an inaccurate representation of the marginal rate for $40,000 of income. 
Option 4: 12.00% — This is the top rate that applies only to income above $200,001. Since Ms. Smith’s income does not reach that threshold, this option does not reflect the marginal rate for her earnings. 
In summary, because the entire $40,000 of income lies within the first bracket taxed at 5%, the marginal tax rate is 5%.

SP25-BL-BUS-A327-1377 Quiz 1

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 Ms. Smith has $40,000 taxable income. Determine the marginal tax rate.

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