The difference between average and marginal tax rates is that

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• Average tax rate is applied to income at the end of each year, whereas marginal tax rate is applied to operating income at the end of each month.

• Average tax rate is based on average annual earnings, whereas marginal tax rate is based on average monthly earnings.

• Average tax rate is calculated on total taxable income, whereas marginal tax rate is calculated on next dollar earned.

• Average tax rate is calculated on next dollar earned, whereas marginal tax rate is calculated on total taxable income.

• Average tax rate is applied to personal income, whereas marginal tax rate is applied to corporate income.