Marginal tax rate

A marginal tax rate is the tax rate that applies to the last dollar of the tax base (taxable income or spending), and often applied to the change in one's tax obligation as income rises. An individual's tax bracket is the range of income for which a given marginal tax rate applies.

It's the rate to which the combined federal, state, and local tax rates are applied to the next additional dollar of income.
 * For example, if your federal tax bracket is 28%, and your state tax rate is 5%, when you earn another dollar of income, it would be taxed at a 33% tax rate.

The rate also indicates how much tax you would save on each dollar of income that does not need to be reported on your tax return.

Marginal tax rates do not fully describe the impact of taxation.

The marginal tax rate may increase or decrease as income or consumption increases, although in most countries the tax rate is (in principle) progressive. In such cases, the average tax rate will be lower than the marginal tax rate: an individual may have a marginal tax rate of 45%, but pay average tax of half this amount.

Marginal Rate of Zero
A tax with a marginal rate of zero is a fixed-amount tax, such as a tax of $100 on every house rather than a percentage of the value of the house.

Flat Rate Tax
A flat rate tax has a constant marginal tax rate.

In a jurisdiction with a flat tax, everyone pays the same marginal tax rate. Some fixed amount of earnings (e.g., the first ten thousand dollars) is typically exempt from the flat tax, which means that not everyone pays the same average tax rate.