rate paid on the last dollar of taxable income. For example, assume for married couples filing jointly that there are two tax brackets:
The 15% and 28% are marginal tax rates, while the average tax rate is a little over 20% ($10,132.50/$50,000).
amount of tax imposed on an additional dollar of income. In the U.S. progressive income tax system, the marginal tax rate increases as income rises. Economists believing in supply-side economics hold that this reduces the incentive to be productive and discourages business investment. In urging that marginal tax rates be cut for individuals and businesses, they argue that the resulting increased work effort and business investment would reduce stagflation.