Taxes
True marginal burden of a raise
Price each incremental amount separately. Different taxes stack, so the real cost of extra income widely exceeds the headline bracket.
The Formula
Marginal Burden = Tax Increase on the Raise / Raise Amount
Price each incremental amount separately. Different taxes stack, so the real cost of extra income widely exceeds the headline bracket.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| dT | Additional tax caused by the raise | currency | Sum across every applicable tax, including payroll, which has no deduction floor. |
| dI | Raise amount | currency | The gross increase in income before tax. |
What Each Symbol Means
dTcurrency
Additional tax caused by the raise
Sum across every applicable tax, including payroll, which has no deduction floor.
dIcurrency
Raise amount
The gross increase in income before tax.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate effective tax rate page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Effective Tax Rate, filed under Finance. Every number the guide produces comes from substituting into this one line.