What is the term for the total tax paid by a taxpayer divided by their taxable income?

The term for the total tax paid by a taxpayer divided by their taxable income is the Average Tax Rate. This rate provides an overall measure of the effective percentage of income that a taxpayer is actually paying in taxes. It reflects the proportion of the total income that is taken by taxes and gives taxpayers a clearer understanding of their total tax burden relative to their income.

The Average Tax Rate is distinct from the Marginal Tax Rate, which refers specifically to the rate of tax applied to the last dollar of income earned. The Effective Tax Rate is often used interchangeably with the Average Tax Rate, but it typically includes all deductions and credits and can relate to the percentage of total income, not just taxable income. The Capital Gains Tax Rate, on the other hand, specifically pertains to the taxation of profit from the sale of assets or investments and does not apply to the overall calculation of taxes paid versus income.

Understanding these terms is crucial for taxpayers to manage their finances effectively and evaluate their tax obligations relative to their income.