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With a Progressive Rate Structure, the Average Tax Rate Is

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With a progressive rate structure, the average tax rate is always smaller than the marginal tax rate.
If the tax rate structure is progressive, the average tax rate is either smaller than or is equal to the marginal tax rate. Since the two can be equal, the average is not always smaller.


Definitions:

Present Value

The present cost of a future sum of money or cash flow series, considering a designated return rate.

Annual Percentage Rate

The annual rate charged for borrowing or earned through an investment, which includes any fees or additional costs associated with the transaction.

Annual Percentage Rate

The annual rate charged for borrowing or earned through an investment, which includes any fees or additional costs associated with the transaction, expressed as a percentage.

Effective Annual Rate

The genuine rate of interest that an investment, savings account, or loan delivers, factoring in the effects of compounding.

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