Monday, April 27, 2015

Graduated or progressive tax rates



I like the idea that individual income taxes are based on graduated or progressive rates and schedules. The idea is, the more money you make, the more you pay in taxes.  

At present US individual income taxes are based on graduated or progressive rates and schedules. 

However, before the rate or schedule is applied to a person’s income, various deductions, exemptions and credits are allowed.  Therefore, the actual income a person earns is not the income subject to taxes.  Technically, the adjusted or net or “taxable income” is the income taxed.

So while the concept of graduated or progressive rates and schedules seems to be accepted in the US, the passage of laws allowing deductions, exemptions and credits throws the general principle off balance for individuals.  The result is that people with high incomes do not necessarily pay high taxes.


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