A company pays tax at a rate of 15 on its first 50000 of inc

A company pays tax at a rate of 15% on its first $50,000 of income. If it has $60,000 of taxable income and an average tax rate of 18%, what is the marginal tax rate on its last $10,000 of income?

a. 15%

b. 33%

c. 18%

d. 25%

Solution

Tax on first $50000 = 50000*15% = 7500 Total tax = 60000*18%= 10800 Marginal tax rate = (10800-7500)/10000= 33%