Question 18 1 pts Tom earns $35,000 per year. The income tax rate on incomes below $20,000 is 10 percent.
The rate on income between $20,001 and $35,000 is 15 percent. Which of the following is/are true? The
income tax is progressive. The income tax is regressive. Tom's marginal income tax rate is 15 percent. Next

Question;

Answer

Tom's marginal income tax rate is 15 percent.

The marginal tax rate is the amount of additional tax that must be paid for each new dollar of income received. The average tax rate is calculated by dividing the total tax paid by the total income earned. A marginal tax rate of ten percent indicates that ten cents of every dollar earned are taxed. The tax rate that applies to each successive level of income is known as the marginal tax rate. As your income rises, you pay more in taxes and a percentage of your income goes into a higher tax band under our progressive tax system. (For the 2021 tax-filing season, there are seven tax rates, with the lowest at 10% and the highest at 37 percent.) Your marginal tax rate, on the other hand, is based only on your taxable income, which is where you land after subtracting your standard deduction and itemized deductions from your gross annual income. The higher your income level, the higher your marginal tax rate will be.

The average tax rate (also known as the effective tax rate) is the percentage of a taxpayer's annual income that is paid in taxes. A taxpayer's marginal tax rate, on the other hand, is the tax rate applied on their "final dollar of income."

For example, a person with a taxable income of $24,750 will pay 10% on the first $19,900 of revenue and 12% on the remaining $5,000 because a portion of the income falls into the 12% bracket. Because the last dollar of income falls into the 12 percent tax bracket, the marginal tax rate would be 12 percent. The average tax rate paid by taxpayers is lower — frequently much lower — than the marginal rate.