The average tax rate is
A)the amount of tax paid as a percentage of total taxable income.
B)the amount of tax paid on total income earned.
C)a better indicator of tax-efficient planning than the marginal rate of tax.
D)the amount of tax paid as a percentage of net income.

Question

Quizplus · Accepted Answer

The average tax rate is the amount of tax paid as a percentage of total taxable income. It reflects the proportion of income that goes towards paying taxes and provides a more accurate assessment of the overall tax burden than just looking at the marginal rate. Choices B and D are incorrect because they do not take into account taxable income, while choice C is false because the marginal rate is a better indicator of the tax impact of specific transactions or income sources.

The Average Tax Rate Is