From the perspective of taxable income, what effect does Marie's consulting business have on the Mellons' overall tax responsibility?

When analyzing the impact of Marie's consulting business on the Mellons' overall tax responsibility, it’s important to understand how business income is taxed. The income generated from Marie's consulting efforts is considered self-employment income. This income adds to the total taxable income reported on the Mellons’ tax return.

As taxable income increases, it typically results in a higher tax liability due to the progressive nature of the federal income tax system, meaning that as income rises, the marginal tax rate applied to additional income can also increase. Consequently, having an additional source of income from the consulting business can indeed lead to an increase in their average tax rate since their tax bracket may rise or they may pay a higher effective tax rate overall.

Moreover, this additional income does not inherently provide new tax credits or allow for deductions like self-employment tax to offset the increase in income. It simply raises their overall taxable income, which can impact their tax bracket.

In this context, the choice that states that the consulting business increases their average tax rate accurately reflects the way taxable income works in relation to self-employment earnings.