Tax rate

ratio (usually expressed as a percentage) at which a business or person is taxed

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.

TypesEdit

  • 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.[1]
  • An average tax rate is the ratio of the total amount of taxes paid to the total tax base given in a percentage.[1]
  • A marginal tax rate is the tax rate on income set at a higher rate for incomes above a designated higher bracket.

ReferencesEdit

  1. 1.0 1.1 "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.