Effective Tax Rate
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The actual percentage of total income paid in taxes, calculated by dividing total tax liability by total gross income.
## Effective Tax Rate
The effective tax rate (ETR) is the true measure of tax burden. It accounts for all brackets, deductions, and credits to show what percentage of income actually goes to taxes.
### How It's Calculated
```
Effective Tax Rate = Total Tax Paid ÷ Gross Income × 100
```
### Example
A US single filer earning $100,000 in 2025:
- Standard deduction: $15,200
- Taxable income: $84,800
- Tax: $14,260 (approx.)
- Effective rate: 14.3% (vs. 22% marginal rate)
### Why It Matters
Comparing effective tax rates across countries reveals the true tax burden better than comparing top marginal rates. A country with a 50% top rate but generous deductions may have a lower ETR than a country with a 35% rate and few deductions.
### Corporate ETR
Corporate effective tax rates are widely studied and often differ significantly from statutory rates due to tax incentives, depreciation, and international tax planning.