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Forum - Why do tax brackets work this way

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mikejohnsonPosted: Jun 29, 2011 - 03:54
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Level: 1
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Why do tax brackets work this way why is it that a Rich/Wealthy person the first few 000 dollars may be taxed at 10% than the next 30 000 dollars is taxed at 20% than over 3 million dollars is taxed may be taxed at 70% why does a Progressive Tax System work this why why can't the rich pay 70% on the first few 000 dollars too is it because than the Working Class would be paying 70% too or am I wrong about this flat rate please help me understand ?

Example

Imagine that there are three tax brackets: 10%, 20%, and 30%. The 10% rate applies to income from $1 to $10,000; the 20% rate applies to income from $10,001 to $20,000; and the 30% rate applies to all income above $20,000.
Under this system, someone earning $10,000 would be taxed at a rate of 10%, paying a total of $1,000. Someone earning $5,000 would pay $500, and so on.
Meanwhile, someone earning $35,000 would face a more complicated calculation. The rate on the first $10,000 would be 10%; the rate from $10,001 to $20,000 would be 20%; and the rate above that would be 30%. Thus, he would pay $1,000 for the first $10,000 of income; $2,000 for the second $10,000 of income; and $4,500 for the last $15,000 of income; in total, he would pay $7,500, or about 21.4%.

http://en.wikipedia.org/wiki/Tax_bracket

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The Real RoxettePosted: Jun 29, 2011 - 04:03
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There ARE more sluts in public schools. Shut up and let me explain.

Level: 8
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CyborgJesusPosted: Jun 29, 2011 - 05:00
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Level: 6
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If you remove tax brackets and tax someone just slightly above the threshold, he might end up making less money than someone under it.

Staying with the example, if I make $10,000, I'm taxed 10$ and get to keep $9,000.
Now I get a 10% raise, but this means I'm subject to a 20% rate; If you apply this rate to my whole income, I'm paying $2,200 and only keep $8,800, which is less than I had before the raise, so I'm understandably pissed off.

If you just tax the $1000 I made in excess of the $10,000, I'm only paying $200 more in taxes than the year before, so I get to keep $9,800.

Removing tax brackets just benefits the ultra-affluent, while overcharging people who are just joining the club of the rich.

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CyborgJesusPosted: Jun 29, 2011 - 13:09
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Level: 6
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I made a quick graph comparing a progressive tax system w/ tax brackets with one that uses the highest applicable tax rate for your whole income.

Note that I'm using the cheap excel graph function with interpolated data points, so excel draws the line between them (the small + signs) "so it looks correct".

For simplicity, I'm treating all gross as taxable income, so the "real" numbers will be different. Tax rates are US Federal income tax rates for 2011.

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The Burger KingPosted: Jun 29, 2011 - 14:02
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I can't stop posting pictures of poop, what the fuck is wrong with me?

Level: 5
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@CyborgJesus prove it

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