Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year. Indy should: Question 5 options: 1) accept the raise because his after-tax income will rise by $1,500. 2) reject the raise because his after-tax income will fall by $3,000. 3) reject the raise because his after-tax income will fall by $4,500. 4) reject the raise because his after-tax income will fall by $6,000.
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