Question

A marginal tax rate is:

a. the total tax paid divided by the amount of taxable income.
b. equal to a worker’s income tax bracket.
c. applied only to high earners under a progressive income tax system.
d. the tax rate paid on a worker’s next dollar of income.
e. irrelevant for making decisions about earning extra income.

Answer 1

Answer:

The corret answer is d. the tax rate paid on a worker’s next dollar of income..

Explanation:

For small business owners, two of the most important determinations they can make are to calculate their marginal tax rates, along with their average tax rates. The marginal tax rate of a business is the percentage at which the last dollar entered was taxed. If this rate is considered too high, you can reduce the incentive for companies to generate additional income. The average tax rate is the percentage of your total taxable income that you pay in taxes.