In a tax system, the tax rate is the ratio (usually expressed as a percentage) at which a business or person is taxed. There are several methods used to present a tax rate: statutory, average, marginal, and effective. These rates can also be presented using different definitions applied to a tax base: inclusive and exclusive.
- A statutory tax rate is the legally given rate. An income tax could have multiple rates for different income levels, where a sales tax may have a flat rate.
- An average tax rate is the ratio of the total amount of taxes paid to the total tax base given in a percentage.
- A marginal tax rate is the tax rate on income set at a higher rate for incomes above a designated higher bracket.
- "What is the difference between statutory, average, marginal, and effective tax rates?" (PDF). Americans For Fair Taxation. Archived from the original (PDF) on 2007-06-14. Retrieved 2007-04-23.