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Economics 101: Average Tax Rate | SterlingTerrell.net

Economics 101: Average Tax Rate

What is defined as the average tax rate?

It is simple.

Average Tax Rate = Total Taxes Paid / Total Income

This is usually calculated at the federal level, in regard to federal income taxes.

Sometimes it is calculated at the state level, in regard to state income taxes.

But think about if you followed the formula to the T.

Total income taxes paid.
Total property taxes paid.
Total dividend taxes paid.
Total capital gains taxes paid.
Total sales taxes paid.

Everything.

Then divide that by your total income.

THAT is the average tax rate.