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 ?
If the maximum taxable income increases at a faster rate than incomes in a given quintile, the average tax rate for the quintile will tend to rise.
For each CU, the difference is the average tax rate calculated by the tax calculator minus the tax rate estimated by the CE:
Estimated parameters or coefficients of explanatory variables are considered as average tax rates which are then applied to each revenue base to calculate potential revenues.
06 percent average tax rate is the best measure of the cost of government to the couple--at least for the portion of government financed by the personal income tax.
One approach is to introduce average tax rates as well as marginal tax rates in the regression analysis.
There is no Canadian counterpart to the NBER TAXSIM model that we know of, and since we were unable to devise a similar method to estimate an average tax rate for the Canadian provinces during the time period, those players were dropped form the model.
If the average tax rate is calculated as taxes divided by profits net of dividends received from non-consolidated corporations, the average tax rate would be 38.
1) One reason that a cut in the marginal tax rate or HMTR is not necessarily a stimulus to the economy is that this HMTR applies to only a small number of taxpayers and is not necessarily a reduction in the average tax rate for all taxpayers.
For one-earner married couples with two children, Britain's average tax rate is 27.
It is expected that the ongoing freeze on the average tax rate will still hold at 10.
The New York Times reported in 1984 that the twelve top military contractors paid an average tax rate of 1.