FINANCE QUESTION*** Marginal Tax Rate?

Question

Define the difference between the marginal tax rate and the average tax rate.

1 MORE QUESTION

Which of the features of the corporate form of ownership are responsible for the fact that corporations are the dominant legal form of business?

Easy 10pts

Answer 1

Post YOUR answer or opinion and explain your position.  We'll be HAPPY to critique it from that standpoint.  But we won't just give out homework answers.

Answer 2

Do your own homework.  Figure out what average means.  Figure out what marginal means.  Create a sample tax scenario and compare the two.

As for corporations, verify your homework and make sure you know *which* corporate structure you are talking about.  C corporations are very different than S corporations.

PS, didn't you study at all this semester?  You've asked 84 homework/test questions and I suspect most of the answers are the type that will get you a D in the course.

Answer 3

The marginal tax rate is the amount of tax paid on an additional dollar of income. As income rises, generally so does the tax rate.  For example, in the US, there are several tax "brackets".  For a single person in 2007, the first tax bracket is 10% of taxable income up to $7825.  The next tax bracket is 15%.  So someone who had $10,000 of taxable income would pay an additional $0.15 in tax for every additional dollar earned.

The average tax rate is computed just like any other average: divide the total tax paid by the total taxable income.  So, for example, if someone paid a total of $800 tax on a taxable income of $10,000, then the average tax rate would be 8%.