what s the difference between the effective and marginal tax rate 
an effective tax rate is the average tax rate for an individual or corporate taxpayer as such it s the percentage of taxes owed from the taxpayer s annual income a marginal tax rate on the other hand is the total amount of tax levied on different levels of income this means that a taxpayer s tax rate gets higher as their income rises taxpayers are divided into tax brackets under marginal tax systems where the first level of income is charged a lower rate any income earned above that incurs a higher rate 