# Suppose your average tax rate is 15%, your marginal tax rate is 30%, and your income is \$50,000. What is the difference between your current tax liability, and your tax liability if your income were to rise to \$55,000.

## Expert Answers To determine your tax liability when your income is at \$50,000, you do not need to know your marginal tax rate.  All you have to know is your average tax rate.  Your average tax rate tells you how much of that \$50,000 (assuming that there are no deductions or anything like that and all of this income is taxable) you will pay.  All you do is to multiply \$50,000 by 15 percent.  50,000*.15 =  \$7,500.  So, your current tax liability is \$7500.

In order to find how much you will pay if your income goes up to \$55,000, all you need to know is the marginal tax rate.  The question states that your marginal tax rate is 30 percent.  This means that 30% of every dollar above the \$50,000 will be taken in taxes.  Therefore, we multiply \$5,000 by 30 percent.  5,000*.3 = \$1,500.  This means that you will have \$1,500 of those extra \$5,000 take from you in taxes and will only take home \$3500 of that extra income.

Thus, the difference between your tax liability at \$50,000 of income and that at \$55,000 is \$3,500.

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