Dec 7, 2012, 4:02 PM
Registered: May 29, 2002
Do you know how marginal rates work? Because the top marginal rate is the rate paid on income above a certain threshold, not on total income. With a top marginal rate of 57%, it is mathematically impossible to pay 57% of your total income in tax.
EDIT: Just in case, here's how marginal rates work. You pay a certain percentage of your income up to a particular threshold. Income over that threshold but beneath the next threshold is taxed at a different rate, all the way up to the top rate. For instance, here's the marginal rate structure for a single person filing in the US:
In reply to:
10% on taxable income from $0 to $8,700, plus
15% on taxable income over $8,700 to $35,350, plus
25% on taxable income over $35,350 to $85,650, plus
28% on taxable income over $85,650 to $178,650, plus
33% on taxable income over $178,650 to $388,350, plus
35% on taxable income over $388,350.
If I make 35k this year, I'll pay 10% on the first $8,700, so $870, plus 15% on the remaining $26,300, which is 3945. My total income tax for the year is 4815, so my effective rate is a bit more than 13%.
(This post was edited by styndall on Dec 7, 2012, 4:10 PM)