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When taxes are levied on a progressive basis, it is vital to distinguish between the Marginal and Average rate of Tax. The marginal rate is that the tax paid on the last dollar earned, whereas the average rate is total taxes divided by total income. In the US, in 2007, a married person with a taxable income of $357,001 would pay 35% on the last dollar earned, however the total taxes payable by this person would be $94,601 or 26.5%. This would be levied on the taxpayer's taxable income, so the average rate to total income would be less.
When taxes are levied on a progressive basis, it is vital to distinguish between the Marginal and Average rate of Tax. The marginal rate is that the tax paid on the last dollar earned, whereas the average rate is total taxes divided by total income. In the US, in 2007, a married person with a taxable income of $357,001 would pay 35% on the last dollar earned, however the total taxes payable by this person would be $94,601 or 26.5%. This would be levied on the taxpayer's taxable income, so the average rate to total income would be less.
[[category:Taxation]]
[[Category:Taxation]]
[[Category:Business]]
[[Category:Business]]
[[Category:Finance]]
[[Category:Finance]]