Final answer:
The tax rate applied on the next dollar of taxable income is the marginal tax rate. It is a part of progressive tax systems and increases as one's income rises.
Step-by-step explanation:
The tax rate that is applied on the next dollar of taxable income is referred to as the a. marginal tax rate. A marginal tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify. It is the rate at which the last dollar of income is taxed, and in progressive tax systems, like in the United States, this rate increases as income rises. For example, in 2023 there were seven tax rates for individuals: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Unlike the marginal tax rate, the average tax rate is the total tax paid divided by total income, reflecting the overall percentage of your income that is taxed. The effective tax rate is similar but takes into account various deductions and credits, resulting in the actual rate of taxation.