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www.bankrate.com... fective-tax-rates/
Most of us likely pay a lower overall rate of tax than what our tax bracket indicates. The reason is because our tax system is progressive. We now have six income tax rates, starting at 10 percent and topping out at 35 percent. And all the ordinary earnings, that is, our wages, are taxed at all those rates. Take, for example, a single taxpayer making $175,000. That total puts that filer in the 33 percent tax bracket, but he doesn't pay 33 percent on the whole $175,000. He pays 10 percent, 15 percent, 25 percent, 28 percent and 33 percent on that money based on the amounts that are covered by the tax brackets. The bottom line is that this hypothetical taxpayer doesn't owe the IRS $57,750, which is 33 percent of $175,000. Rather, he owes Uncle Sam $42,622, which is an effective tax rate of around 24 percent. This is because parts of his earnings are also taxed at rates lower than his top, marginal tax rate of 33 percent. You can see the precise tax bill breakout for our hypothetical $175,000 earning taxpayer in Bankrate's Tax Basics article What's my tax rate? The bottom line is that you can't just rely on your marginal tax rate, which is the tax bracket rate applied to the last dollar you earn. Rather, you need to look at your effective tax rate, which is calculated by dividing the tax you owe by your taxable income amount. Read more: Marginal vs. effective tax rates | Bankrate.com www.bankrate.com...
www.vanityfair.com...
It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride.
Originally posted by NiteNGale2
To sum up narwahl's and Kovenov's answers: Maths make brain hurt. Really guys, the OP wanted clarification, not obfuscation.
For 2012, there will be six tax rates of:
•10%,
•15%,
•25%,
•28%,
•33%, and
•35%.
Definition of 'Marginal Tax Rate'
The amount of tax paid on an additional dollar of income. The marginal tax rate for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon their earnings, with low income earners being taxed at a lower rate than higher income earners.
Originally posted by Indigo5
reply to post by OccamsRazor04
Because the rates you posted (without a link) appear to be bogus???...please show the 40% or 50% bracket?
en.wikipedia.org...(federal_income_tax)
taxes.about.com...
For 2012, there will be six tax rates of:
•10%,
•15%,
•25%,
•28%,
•33%, and
•35%.
also
Definition of 'Marginal Tax Rate'
The amount of tax paid on an additional dollar of income. The marginal tax rate for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon their earnings, with low income earners being taxed at a lower rate than higher income earners.
Read more: www.investopedia.com...edit on 1-11-2012 by Indigo5 because: (no reason given)edit on 1-11-2012 by Indigo5 because: (no reason given)
Either way, the best measure is the EFFECTIVE tax rate which takes into account deductions and loop-holes...it is why Mitt Romney has been paying 14% or less while earning Millionsedit on 1-11-2012 by Indigo5 because: (no reason given)
Originally posted by OccamsRazor04
Can you seriously not read? I am perplexed by your post, it shows .. well T&C prevent me from saying what I think.
OP did not ask for figures, he asked what the term meant. I provided that information, I stated HYPOTHETICAL FIGURES to explain it. Your post is meaningless.