What is the difference between average and marginal tax rates?
Which should we use when making financial decisions?
E.g. Suppose a firm earns $3 million in taxable income. If the firm is considering a project that will increase its taxable income by $1 million, what tax rate should be used in analysis?
thx ar!
marginal tax rate vs average tax rate
2008-04-30 12:49 am
回答 (2)
2008-04-30 5:54 am
average tax rate- money paid in tax/total taxable income
marginal tax rate- the percentage of tax u need to pay for earning an extra dollar
it depends which to use. if company wants to know how much money will be gone in total by tax, use average
marginal tax rate- the percentage of tax u need to pay for earning an extra dollar
it depends which to use. if company wants to know how much money will be gone in total by tax, use average
2008-04-30 12:57 am
If the firm is considering a project that will increase its taxable income by $1 million.
marginal tax rates should be used
o.k.?
marginal tax rates should be used
o.k.?
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