Difference between revisions of "Tax rate"
(added para to distinguish between marignal and average tax rates) |
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| − | A '''tax rate''' is the rate at which | + | A '''tax rate''' is the rate at which taxes are levied. |
| − | For [[progressive tax]]es such as [[income tax]] is in the [[United States]], the rate will change based upon level of income, increasing with greater income values. | + | For [[progressive tax]]es such as [[income tax]] is in the [[United States]], the rate will change based upon level of income, generally increasing with greater income values. |
For [[sales tax]], the rate is the same for everyone. The tax paid only varies based upon the total dollar value of the purchase. | For [[sales tax]], the rate is the same for everyone. The tax paid only varies based upon the total dollar value of the purchase. | ||
Revision as of 15:45, September 22, 2008
A tax rate is the rate at which taxes are levied.
For progressive taxes such as income tax is in the United States, the rate will change based upon level of income, generally increasing with greater income values.
For sales tax, the rate is the same for everyone. The tax paid only varies based upon the total dollar value of the purchase.
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.