I keep getting varied answers, so it seems most people aren't too sure themselves. For example, I was told that the Carter 70% tax bracket for the rich was NOT a 70% revenue collection from say one million dollars, but a surplus collection until the income was 300,000 or less. Can someone explain how this really works? Thanks : )
Each bracket has a range. The part of your taxable income that's within that range is taxed at that rate. If for example there were two brackets, 10% for 0-40,000 and 20% for over 40,000 (NOT actual numbers by the way) then your taxable income up to 40K would be taxed at 10%, and the amount over 40K at 20%. So if your taxable income was 50k, your tax would be 10% of 40K plus 20% of the additional 10K, for a total or 4000+2000 or $6000.
Federal Income Tax Brackets For 2011--Based On Taxable Income Ranges Married Filing JointlyMost Single Filers 10% Not over $17,050 Not over $8,525 15% $17,050 - $69,300 $8,525 - $34,650 25% $69,300 - $139,850 $34,650 - $83,900 28% $139,850 - $235,550 $83,900 - $194,150 36% $235,550 - $380,500 $194,150 - $380,500 39.6% Over $380,500 Over $380,500
the brackets are: 10%, 15%, 25%, 28%, 33% and 35% the 10% is on the first $8375 the 15% is on the next income up to $34000 the 25% is on income up to $82400 the 28% is up to $171850 the 33% is $373650 and anything over that is at 35% that's how brackets work
No it's not right. Only the amount of your additional income that goes above the limit for the next bracket is taxed at the higher rate. Everything else is taxed at the same rates it was before. You don't pay the higher bracket percent on your entire income. So no, it's not possible to make less net income because you are now in a higher bracket.
I keep getting varied answers means the question is poorly worded. When people toss phrases around like revenue collection and surplus collection I have to question what they really meant. Tax brackets are for each additional dollar of taxable income. First you calculate total income, adjust it and then subtract itemized/standard deduction and exemptions to get taxable income. Over the years closing loopholes has meant that taxable income has gotten higher and more income is taxedso even if the tax rates are lower now, the tax bill could be higher for the same gross income. Second, you use the tax brackets to determine the tax. Some income is taxed at each bracket. In 1988-1990 (after Carter) there was a stupid bubble system. They simplified the tax system to 2-3 brackets. They said 2, but there was a 3rd bubble rate. The bubble added a surcharge on income until the 15% tax bracket had been effectively changed to 28%. Then the rate dropped back to 28%. In 1977 and 1978, the top rate of 70% was for each additional dollar above $102,200 for singles. All brackets increased as income went up. In 1979 and 1980, the top rate of 70% applied to income above $108,300 for singles. (Rather than guess, I looked up the tax tables from the tax booklets for those years--the booklets are available at irs .) There was nothing magical about either $1M or $300K. In 1982, the top rate dropped to 50%. But the way income was calculated changed too. In 1987, the top rate dropped to 38.5%. In 1988, the system dropped to 3 rates. 15%, 28% and 33%. For income above $89,560, you were done with the bubble--the 33% would have made all income taxed at 28%, so no you got to pay 28% for the amounts above $89,560. By 1991, the bubble was gone and, no surprise, by 1993, the rates were going back up again.
