what is the difference between effective and marginal tax rates 
the effective tax rate is a more accurate representation of a person s or corporation s overall tax liability than their marginal tax rate and it s typically lower the marginal tax rate refers to the highest tax bracket into which their income falls in a progressive income tax system like the one in the united states income is taxed at differing rates that rise as income increases to certain thresholds two individuals or companies with income in the same upper marginal tax bracket may end up with very different effective tax rates depending on how much of their income was in the top bracket 