Final answer:
The rates in the Tax Rate Schedules are referred to as marginal tax rates, representing the tax rate on additional income as income increases. Marginal tax rates differ from average tax rates, which measure the proportion of total income paid in taxes.
Step-by-step explanation:
The rates in the Tax Rate Schedules are often referred to as marginal tax rates. These rates apply to income within particular ranges and represent the tax rate paid on an individual's additional or last dollar of income. The higher an individual's income, the higher the marginal tax rate they may have to pay, following the design of progressive tax systems, such as those seen in the U.S.
An individual's average tax rate, on the other hand, is the proportion of their total income that is paid in taxes, which can differ from the marginal tax rate which only applies to the last dollar earned. As income increases, marginal tax rates also increase, thereby redistributing wealth from higher-income to lower-income households. Therefore, after-tax income disparities are reduced compared to pre-tax income disparities.