The tax rates embodied in the federal personal income tax are such that:

Question

Quizplus · Accepted Answer

The marginal tax rate is the tax rate on the last dollar earned, while the average tax rate is the total tax paid divided by the total income. Since the tax rates are progressive, meaning that the tax rates increase as income increases, the marginal tax rate is higher than the average tax rate. As taxpayers move into higher tax brackets, they pay a higher marginal tax rate on their additional income, causing the average tax rate to rise as well. Therefore, D is the correct answer.

The Tax Rates Embodied in the Federal Personal Income Tax