The ultimate economic burden of a tax is best captured by:
A) The marginal tax rate.
B) The effective tax rate.
C) The average tax rate.
D) The proportional tax rate.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The effective tax rate captures the total amount of tax paid as a percentage of income, taking into account any deductions or exemptions. This provides a more accurate measure of the ultimate economic burden of a tax than simply looking at the marginal or average tax rate, which only consider one aspect of the tax system. The proportional tax rate would only be relevant in situations where the tax is a flat rate on all income, which is not the case for most taxes.

The Ultimate Economic Burden of a Tax Is Best Captured