Question

The ___ tax rate is the best measure of the tax burden because it is the average level of tax on all income from taxable and nontaxable sources.

The ___ tax rate measures the average level of tax on only taxable income.
The ___ tax rate indicates the rate of tax on the next additional increment of income.

Answer 1

The EFFECTIVE tax rate is the best measure of the tax burden because it is the average level of tax on all income from taxable and nontaxable sources.

The AVERAGE tax rate measures the average level of tax on only taxable income.

The MARGINAL tax rate indicates the rate of tax on the next additional increment of income.

Step-by-step explanation:

The effective tax rate and the average tax rate are basically the same thing.

Effective tax rate = total taxes due ÷ total taxable income

or Average tax rate

Marginal tax rate is the tax rate applicable for additional income ($$$)