Asked by Logan perry on May 02, 2024
Verified
Which of the following statements is false with respect to marginal and average tax rates?
A) For most taxpayers,the average rate is larger than the marginal rate.
B) For taxable income greater than the lowest tax bracket,the average rate is always greater than the lowest marginal rate and less than the highest marginal rate.
C) The average rate is the percentage of tax paid on the entire amount of taxable income.
D) The marginal rate is the proportion of tax paid on the next dollar of taxable income.
Marginal Tax Rates
The rate of tax applied to your last dollar of income, representing what percentage of any additional earned income will be taken as tax.
Average Tax Rates
The ratio of the total amount of taxes paid to the total income, providing a measure of the tax burden.
Taxable Income
The portion of an individual’s or entity’s income that is subject to income tax after all deductions and exemptions.
- Explain the differences between marginal and average tax rates.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
A
Explanation :
This statement is false because for most taxpayers, the marginal rate is larger than the average rate. The marginal rate only applies to the additional income earned in the next tax bracket, while the average rate is the total tax paid divided by taxable income. As income increases and moves into higher tax brackets, the marginal rate generally increases, resulting in a larger difference between the marginal and average rates.
Learning Objectives
- Explain the differences between marginal and average tax rates.