If you make an extra 1000 in income and your marginal tax rate is 30 percent while your average tax rate is $300 (1,000X30%).
The marginal tax rate is the tax rate paid on an additional dollar of income. In the United States, the federal marginal tax rate for individuals increases with respect to the rise in income.
This method of taxation, which is known as progressive taxation, aims to apply tax on the individuals based upon their earnings. Low-income earners are being taxed at a lower rate than the higher income earners.
Under the marginal tax rate, taxpayers are most often divided into tax brackets or ranges, which determines the rate which is applied to the taxable income of the tax filer.
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