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Re:Pooling and Sharing of wealth make everyone's wealth grow... by FirmwareBurner on Saturday September 02, 2023 @05:24AM (#37359867)
>They quoted marginal rates, not effective rates, which is usually the case when people start talking about these high numbers.

I'm confused. What's the difference?

Re:Pooling and Sharing of wealth make everyone's wealth grow... by vidarh on Saturday September 02, 2023 @05:49AM (#37359990)
To take a simple example:

Let's say a country has only a single 20% tax band that kicks in at 20k.

If you earn 40k, your marginal tax is 20%, but only 20k of your earning is above 20k, so you pay 20% * 30k = 4k in tax for an effective rate of 10% (4k of 40k).

Most countries will multiple tax bands plus deductions which complicates this, and most places very few people have enough of their income taxed at their marginal rate for their effective rate to approach their marginal rate.

Re:Pooling and Sharing of wealth make everyone's wealth grow... by MattPalmer1086 on Saturday September 02, 2023 @05:54AM (#37360021)
Marginal rate is a rate for a band of income. Your effective rate is what you actually pay as a percentage of your total income.

So if you have a marginal rate of 50% but it only kicks in when you earn over a certain amount, you will be paying less than 50% overall (your effective rate).

Re:Pooling and Sharing of wealth make everyone's wealth grow... by sokoloff on Saturday September 02, 2023 @06:11AM (#37360101)
Your effective rate is the overall average, while the marginal rate is the amount you paid on the last (or next) dollar.

If you made $100k, paid $25K in income taxes, and were in a 33% bracket, your effective rate was 25% and your marginal rate was 33%.