Tax rates

Tax rates
Main article: Tax rate
Taxes are most often levied as a percentage, called the tax rate. An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective (average) rate. The effective rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned. For example, if income is taxed on a formula of 5% from $0 up to $50,000, 10% from $50,000 to $100,000, and 15% over $100,000, a taxpayer with income of $175,000 would pay a total of $18,750 in taxes.
Tax calculation
((0.05*50,000) + (0.10*50,000) + (0.15*75,000)) = 18,750
The "effective rate" would be 10.7%:
(18,750/175,000) = 0.107
The "marginal rate" would be 15%.