suresh In Taxation, the difference between marginal tax rate and effective tax rate lies in the way they are calculated and applied to individuals' income.
Marginal Tax Rate is the percentage of tax that applies to the last dollar earned. It is based on the tax bracket in which the individual's income falls. As income increases, the marginal tax rate may increase as well.
Effective Tax Rate, on the other hand, is the average rate at which an individual's total income is taxed. It takes into account all tax brackets and deductions to provide a more accurate representation of the overall tax burden.
In summary, while the marginal tax rate specifically refers to the tax percentage on the last dollar earned, the effective tax rate gives a more comprehensive view of the overall tax impact on an individual's income.
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