The major differences between marginal tax rate and effective tax rate are as follows −
It is additional tax paid on additional dollar is earned.
It’s a percentage of income paid on additional dollar earned.
Different tax rates are applicable.
Amount paid is higher (calculated amount).
Higher income people/companies pays more taxes.
Taxation goes down when income decreases.
Not good for business expansion and is a complicated method.
It is tax paid on taxable income.
Its percentage of income paid on taxes.
Multiple tax rates are applicable.
The tax amount is less (compared to marginal tax rate).
It has diversified impact.
It has minimal impact when income decreases.
It promotes business expansion and is easy for computation.
No checks are required.