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3 September, 09:54

Campbell, a single taxpayer, earns $400,000 in taxable income and $2,000 in interest from an investment in State of New York bonds. (Use the U. S. tax rate schedule). (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. If Campbell earns an additional $15,000 of taxable income, what is her marginal tax rate on this income? b. What is her marginal rate if, instead, she had $15,000 of additional deductions?

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  1. 3 September, 10:10
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    A. Marginal tax rate is 34.02%

    B. Marginal tax rate is 33.00%

    Step by Step Explanation:

    A. If Campbell earns an additional $15,000 of taxable income, her marginal tax rate on the income is 34.02 percent.

    Marginal tax rate=Tax/Taxable income

    ($120,709.05-$115,606.25) = $5,102.8

    ($415,000 - $400,000) = $15,000

    $5102.8/$15,000 = 3.401

    3.401 * 100 = 34.02%

    b. If Campbell instead had $15,000 of additional tax deductions, her marginal tax rate on the deductions would be 33.00 percent.

    Marginal tax rate=Tax/Taxable income

    ($110,656.25-$115,606.25) = $4,950

    ($385,000 - $400,000) = $15,000

    $4,950/$42,000 = 0.33

    0.33*100 = 33.00%
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