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Marginal and average tax rates can be different, and it is the marginal tax rate that...


Marginal and average tax rates can be different, and it is the marginal tax rate that is relevant for most financial decisions.
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Answer #1

Answer : - The above statement is right

Reason : - The marginal tax rate and average tax rates are different and have different purpose and marginal tax rates are more relevant for taking financial decision because financial decisions involve new cash flow or income which will be tax under marginal tax rate not by average tax rate.

The average tax rate is the total amount of tax divided by total income where as the marginal tax rate is the additional tax paid on additional income. The marginal tax rate will tell the tax payer about the tax which will be taxed on additional income or new cash flow.

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