Final answer:
A couple's total amount of income tax paid divided by its total taxable income is their average tax rate, which differs from the marginal tax rate. The U.S. has a progressive tax system where tax rates increase with higher income levels, but the average tax rate may be lower than the highest marginal rate due to different brackets.
Step-by-step explanation:
A couple's total amount of income tax paid divided by its total taxable income is its average tax rate. To comprehend this, consider an example: if a couple has a taxable income of $20,000 and pays taxes of $2,581.25, their average tax rate would be calculated as $2,581.25 divided by $20,000, which equals 0.129 or 12.9%. It's important to distinguish this from their marginal tax rate, which indicates the rate of tax that applies to their last dollar of income and could be higher than the average tax rate.
The federal income tax system in the United States is a progressive tax system, where higher income levels are taxed at higher percentages. In this system, marginal tax rates for a single taxpayer can range from 10% to 35%, depending on the level of taxable income. The average tax rate is a reflection of the percentage of total income that goes towards taxes, and for high-income individuals, it may be less than the marginal tax rate due to the structure of tax brackets.