Average Tax Rate

The proportion of someone’s total income that they pay in tax overall.
It’s the “tax paid on average,” not the marginal tax paid on the last dollar earned.
Example
If someone earns $50,000 and pays $10,000 in income tax, their average tax rate is 20%
Average tax rates are often lower than a person’s top marginal tax rate, because some income is taxed at lower rates.
Example
If you earn $65,000 per year, your top marginal tax rate is 30%, but your average tax rate is only 18%
Visual idea: A pie chart showing “income earned” vs “tax paid overall.”