Average tax rate


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Average tax rate

Taxes as a fraction of income; total taxes divided by total taxable income.

Effective Tax Rate

The tax rate one pays assuming that one pays a flat rate rather than under a progressive system. Under progressive tax systems, one pays different rates for different amounts in income. For example, one may pay 10% for the first $10,000 of income and 25% for all additional income. In practice this means that one would pay somewhere between 10% and 25%. One calculates the effective tax rate simply by taking the total tax liability, dividing by one's taxable income and multiplying by 100.

Suppose one makes $20,000 in a year and is taxed under the above system. This person pays $1000 (10%) of the first $10,000 and 2500 (25%) of the second $10,000. The total tax liability is $3500, which when divided by the $20,000 of income and multiplied 100, is found to have an effective tax rate of 17.5%.
References in periodicals archive ?
One approach to measuring average tax rates is offered by Devereux and Griffith (2003).
* The average tax rate of 14.34 percent for all returns filed for 2015 was the highest of this 10-year study, Tax Years 2006-2015.
The lower average tax rate for pass-through entities than for traditional corporations translates into reduced federal revenues, the researchers conclude.
The vertical effect is determined by two factors: the average tax rate t and the progressivity measure K.
In Tables 1-4, we compare average tax rates (including federal and state level income as well as payroll taxes) and posttax income shares for various income groups before the start of the reform and after it was fully phased-in (base and end year).
From the optimization criterion formulated in this way we can draw a conclusion that the share in income in country B should be increased (decreased) until the extreme tax rate for the income generated in B is lower (higher) than average tax rate in B, calculated for total income.
They are the cost of capital, the effective marginal tax rate (EMTR) and the effective average tax rate (EATR), according to the Devereux-Griffith methodology.
A weighted average tax rate of 24% on ATF prices across various stations in India is among the highest in the world and constitutes the biggest hurdle for domestic carriers in their quest for long term profitable growth.
Since then the average tax rate percentage for the highest-income taxpayers has declined significantly.
An examination of the trend in the average tax rate provides information on how the tax burden has changed over time.
Click here to see a countdown of the world's 20 least demanding tax frameworks The report, which studied 185 economies including 13 in the region, said companies in the Middle East pay a total average tax rate of 23.6 percent compared to a global average of 44.7 percent, the lowest of any region in the world.
It is interesting to note that from 1979 through 2000 the average tax rate for the highest quintile and the top 5 percent of the income earners trended upward, while the average tax rate for the remaining quintiles trended down.