Computing the implicit marginal tax rate

Suppose Caroline is a single parent with one child, and she is trying to determine the effect of transfer benefits and taxes on her implicit marginal tax rate (and thus her incentive to work). The following table shows the transfer benefits and income taxes at various income levels in the economy in which Caroline resides.

Compute the spendable income level Caroline would have at each level of earned income, and enter these values in the last column.

Earned Income from Work	Transfer Benefits	Income and Employment Taxes	Spendable Income
(Dollars)	(Dollars)	(Dollars)	(Dollars)
0	9,987	0	9,987
6,000	8,827	272
12,000	7,368	710
18,000	5,201	1,525
24,000	2,620	2,023
30,000	1,419	2,665

If Caroline's income from work increased from $12,000 to $18,000, her implicit marginal tax rate would be (41.4%, 49.7%,57.3%,150.3%) .

If Caroline's income from work increased from $18,000 to $24,000, her implicit marginal tax rate would be (44.8%,51.3%,60.7%,148.7)