Glossary term
Marginal effective tax rate
A marginal effective tax rate estimates how much of an added amount of income is reduced by the selected components counted in the calculation.
Plain meaning
What marginal effective tax rate means
A marginal effective tax rate, often shortened to METR, starts with an added amount of income and asks how much is reduced by selected items such as income tax, payroll contributions, or an income-tested recovery. It is broader than a marginal tax rate when non-income-tax components are included.
Formula role
How OpenBook uses it
OpenBook uses METR as an educational comparison measure: selected incremental reductions divided by the added income amount. The rate is only meaningful when the components included in the numerator are named.
For example, a tax-only METR may look similar to a marginal tax rate. A broader METR may include payroll contributions or a simplified OAS recovery tax estimate. Payroll contributions are not income tax, so they should be described separately.
Common boundary
Not one universal rate
METR is not a single official Canadian tax rate. It changes with the income amount tested, the province or territory, the income type, and the components included. It does not replace a tax return, official benefit estimate, or complete household benefit calculation.
Primary references
These links provide source context for common components that may be used in a METR-style educational estimate.