Which terms is defined as the total tax paid divided

Subject : Business

Question: Which one of the following terms is defined as the total tax paid divided by the total taxable income?

A) Average tax rate

B) Variable tax rate

C) Marginal tax rate

D) Absolute tax rate

E) Contingent tax rate

Expert Verified Solution:

The correct answer is:

A) Average tax rate.

Explanation:

The average tax rate is defined as the total tax paid divided by the total taxable income. It provides an overall percentage of income that is paid in taxes. This rate gives a sense of the proportion of income that goes to taxes, considering the entire income.

In contrast:

B) Variable tax rate is not a standard term in taxation.

C) Marginal tax rate refers to the rate at which the last dollar of income is taxed, not the total tax paid.

D) Absolute tax rate is not a standard term in taxation.

E) Contingent tax rate is not a recognized term in taxation.