Advanced English Dialogue for Business – Marginal tax rate

Listen to a Business English Dialogue About Marginal tax rate

Lola: Hi Paisley, do you know what a marginal tax rate is in business and finance?

Paisley: No, I’m not sure. What does it mean?

Lola: A marginal tax rate is the tax rate applied to the last dollar of taxable income earned.

Paisley: Oh, so it’s like the tax rate you pay on your highest income bracket?

Lola: Exactly. It represents the percentage of tax paid on an additional unit of income.

Paisley: How do marginal tax rates vary across different income levels?

Lola: Marginal tax rates typically increase as income rises, with higher-income individuals paying higher marginal tax rates.

Paisley: Are marginal tax rates the same for everyone?

Lola: No, marginal tax rates can vary depending on factors like filing status, deductions, and credits.

Paisley: Can you explain how marginal tax rates are calculated?

Lola: Marginal tax rates are determined by the tax brackets set by the government, with each bracket corresponding to a range of taxable income and a specific tax rate.

Paisley: Do marginal tax rates apply to all types of income?

Lola: Yes, marginal tax rates apply to various types of income, including wages, salaries, investment income, and business profits.

Paisley: Thanks for explaining, Lola. Marginal tax rates seem like an important concept for understanding how taxes are calculated.

Lola: No problem, Paisley. It’s crucial for individuals to understand their marginal tax rates to effectively plan their finances and tax liabilities.