Income Tax

Income tax applies to wages and salaries, income from self-employment, and income from investments. People who earn more generally pay income tax at a higher rate than people who earn less. Economists call this kind of tax a progressive tax. 
This helps to reduce income inequality while ensuring everyone contributes to funding our public services.

Marginal vs Effective Tax rates

The government calculates the tax on a person's income using a tool called marginal tax rates. Marginal tax rates are not the same as the amount of income tax you pay, rather, it is the tax rate that applies to the next dollar earned at different levels of income. 

Marginal tax rates for different annual incomes are shown in the table below.

For example, if you earned $70,000 in wages this year, this means your marginal tax rate is 30%. However, you will not pay 30% tax on your whole income, only on the part of your income that was above $53,500. The first $53,500 would still be taxed at the lower rates of 10.5% and 17.5%, as shown in the diagram below. Your effective (or average) tax rate across your whole income will be much lower than 30%, in this example 18.9%.