Marginal Tax Rates, explained

VenkmanVenkman BabyGroot
I stole this from someone, but it's a good explanation:

Let's say marginal tax rates are as follows:

$0-$5: 0%
$6-$8: 25%
$9+: 100%

Let's say you earn $10 a year. Your tax burden would break down as follows:

Dollars 0-5: No tax burden. Dollars in this bracket are untaxed.
Dollars 6-8: Three dollars are within this bracket (dollars 6, 7, and 8), and each of those 3 dollars are taxed at 25%. Total tax burden for this bracket: $0.75.
Dollars 9-10. Two dollars are within this bracket (dollars 9 and 10) and each of those dollars is taxed at 100%. Total tax burden for this bracket: $2.

Total Tax Burden: $2.75.

Or as the economists say, marginal tax rates are the tax rates paid ON THE LAST DOLLAR OF INCOME EARNED.

If you have a marginal tax rate of 100%, that DOES NOT mean you pay all of your income in taxes.

So, those people screaming "Da Dems want you to pay 70% of your income in taxes!!" are either lying, or are clueless as to how tax brackets and marginal rates work. Decide for yourself which it is.

Comments

  • Who doesn't know this kind of stuff?
  • What about the "intentionally misleading ignorant people" option?
  • Though, if the highest bracket is something like 250k, people pulling in 20 million will be paying damn near 70 percent, or whatever is at the top of the bracket.
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