Question

The marginal tax rate is equal to the:_______

a. total amount of a person's tax payment divided by the total amount of the person's taxable income.
b. total amount of a person's tax payment divided by the change in the person's taxable income.
c. change in the person's tax payment divided by the total amount of the person's taxable income.
d. change in the person's tax payment divided by the change in the person's taxable income.

Answer 1

D) change in the person's tax payment divided by the change in the person's taxable income.

Step-by-step explanation:

The marginal tax rate is a form of progressive tax because the tax payment increases as income increases.

The marginal tax rate measures the extra amount of tax you have to pay for each additional dollar of income. In this sense, the marginal tax rate is theoretically 1 at maximum because you cannot tax someone at a rate over 100% of their income.

The formula is:

Marginal tax rate = ΔTax Payable/Δ Taxable income

Where Δ means "change"