MARGINAL TAX RATE

The amount of tax paid on an additional unit of income. The marginal tax rate of a person increases as his or her income rises. The purpose of this taxation method is to tax individuals fairly, based on their earnings. The lower the income, the lower the marginal tax rate is. And the higher the income, the higher the tax is. It is also used to estimate calculations in investment decisions. Oftentimes, taxpayers are divided into income brackets or ranges.