Quote:
Originally Posted by Fuzz
OK, so can we accept that my objection to saying people don't actually pay the marginal rate, and actually pay an effective rate significantly lower is correct? and I'll retract "probably pay less than you or I" which is more of a US thing, I think.
Sorry, this just pisses me off because it's the kind of shallow scary number manipulation the Frasier Institute does when they go on the radio with Danielle Smith to "prove" we pay more taxes than Americans.
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Yes, I can accept that. Sorry, but as an accountant I always appreciated the fact that your effective rate is always going to be lower than your marginal rates. I could see how it could be confusing.
Edit - as an addition to this and added clarity on the concepts it is important to recognize that when tax planning, you should be using your marginal tax rate when looking at doing things. For example, If I am in a marginal tax rate of 42% (highest in Alberta) when looking to sell a stock for lets say a $50K profit. Given it is a capital gain its taxed at 50% so $25K * the 42% means I would pay $10,500 in extra taxes. Or in percentage terms I paid 21% in tax on my $50K gain.
Now when calculating the effective rate I would take all of the tax paid and divide it by my taxable income to get my effective tax rate. That is the difference when looking at tax rates.