Monroe County levies a real property tax based on the following schedule.

Rate Assessed value
3% $-0- to $250,000
+ 1% $250,001 and above

ABC Incorporated owns real property valued at $700,000. Determine ABC's marginal tax rate for taxable income.

Question

Monroe County levies a real property tax based on the following schedule.

Rate	Assessed value
3%	$-0- to $250,000
+ 1%	$250,001 and above

ABC Incorporated owns real property valued at $700,000. Determine ABC's marginal tax rate for taxable income.

BlackTom AI · Accepted Answer

To determine the marginal tax rate, we need to understand how the tax schedule applies to the property value.
Option 1: 1.00% — This is the correct marginal rate because only the portion of value above $250,000 is taxed at the higher rate of 1%. The first $250,000 is taxed at 3%, and anything over that threshold is taxed at 1%, so the marginal rate for income (value) above $250,000 is 1%.
Option 2: 1.71% — This figure resembles the effective tax rate, which is the total tax paid divided by the total taxable value. It is not the marginal rate. Here, the total tax would be $7,500 (3% of 250,000) plus $4,500 (1% of 450,000), totaling $12,000, yielding an average rate of about 1.71%, but that describes the overall rate, not the rate on the next dollar.
Option 3: 2.00% — This would imply that the marginal rate is 2% for the portion above threshold, which is not what the schedule specifies. The schedule sets 3% on up to 250,000 and 1% on amounts above 250,000.
Option 4: 3.00% — This would be the rate applying to the initial bracket (0 to 250,000). It does not apply to the income (value) above the threshold. The marginal rate for the excess over 250,000 is lower (1%), not the higher initial rate.
In summary, the marginal tax rate is determined by the rate that applies to the last dollar earned or, in this context, the last dollar of taxable value. Since ABC Incorporated’s property value exceeds the threshold, only the excess above 250,000 is taxed at 1%, making 1.00% the marginal rate, while the 1.71% figure reflects the overall average tax rate across the entire value.

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

Monroe County levies a real property tax based on the following schedule. Rate Assessed value 3% $-0- to $250,000 + 1% $250,001 and above ABC Incorporated owns real property valued at $700,000. Determine ABC's marginal tax rate for taxable income.

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