Which of the following statements is correct?
A)The average tax rate gauges the sacrifice made by a taxpayer, whereas the marginal tax rate gauges the distortion of taxes on consumer decisions.
B)The marginal tax rate gauges the sacrifice made by a taxpayer, whereas the average tax rate gauges the distortion of taxes on consumer decisions.
C)The average tax rate measures how much the tax system discourages people from working.
D)The marginal tax rate measures total taxes paid divided by total income.

Question

Quizplus · Accepted Answer

The average tax rate measures the overall sacrifice a taxpayer makes in terms of percentage of their income, while the marginal tax rate measures the impact of an additional dollar earned on the taxpayer's tax liability. The marginal tax rate can also affect consumer decisions, as it can discourage people from working more or taking on additional income due to the increased tax liability on those additional earnings.

Which of the Following Statements Is Correct