Fred and Wilma, Married Taxpayers, Earn $100,000 in Taxable Income

question 94

Essay

Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock bonds. Using the U.S. tax rate schedule for married filing jointly for year 2020, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? If Fred and Wilma earn an additional $40,000 of taxable income, what is their marginal tax rate on this income? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent. )(Use tax rate schedule.)

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Definitions:

Maximin Strategy

A decision rule which aims to maximize the minimum payoff attainable, often used under conditions of uncertainty.

Payoffs

The returns or benefits received from a particular action or investment.

Nash Equilibrium

A concept within game theory where each player's strategy is optimal, given the strategies of other players, and no player has anything to gain by changing their own strategy alone.

Dominant Strategy

A strategy in a game theory context that is best for a player regardless of what strategies other players choose.