marginal rate

Definitions (2)

1. The tax rate paid on the last dollar of one's income (known as the marginal tax rate). In a graduated tax system (which most countries use), this rate will be equal to or higher than the tax rate paid on the person's entire income, since the tax rate is lower for the first dollars of income than for subsequent dollars of income.
2. The rate at which a consumer is willing to substitute a product or service for another product or service (the marginal rate of substitution). In general, the more that a good is consumed, the more willing the consumer is to substitute it away; in other words, the marginal rate of substitution falls.

Use marginal rate in a sentence

The marginal rate of my business income from five years ago has increased by two percent every year since then.

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The marginal rate was often overlooked, but it was worth keeping in mind when one was crunching the numbers, as I often did.

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I thought I was getting a really big federal return this year but when I did my taxes I realized I would have to apply a marginal rate.

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