Average tax rate:
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A. B. C. D.A
The correct answer is A. The average tax rate is the rate at which each dollar of taxable income is taxed on average, calculated by dividing the tax liability by taxable income.
To understand the concept of the average tax rate, we need to understand the difference between taxable income and tax liability. Taxable income is the amount of income that is subject to taxation, while tax liability is the amount of tax owed to the government based on that taxable income.
The average tax rate is the percentage of the taxable income that is paid in taxes. It is calculated by dividing the tax liability by the taxable income. For example, if a person has a tax liability of $10,000 on a taxable income of $100,000, their average tax rate would be 10% ($10,000 ÷ $100,000).
It is important to note that the average tax rate is different from the marginal tax rate. The marginal tax rate is the rate at which the last dollar of taxable income is taxed. This rate can be different from the average tax rate, especially if there are different tax brackets with different tax rates for different levels of income.
Overall, the average tax rate is a useful measure for understanding how much of a person's taxable income is paid in taxes on average. It can be helpful for tax planning purposes and for comparing tax burdens across different income levels.