A simple way to understand it is to plot it. Here is a plot of post-tax income vs taxable income for an unmarried filer taking only the standard deduction:
Notice how as you move to the right, the post-tax income always goes up? The rate that it increases changes, but your post-tax income never goes down. You don't lose any money by moving up a bracket with a tax setup like this. You might earn too much for certain benefits and that can be a problem, but that's not related to the marginal tax rate.
Here is a plot of the effective tax rate vs taxable income for the same filer:
Notice how the effective tax rate is never quite as high as the marginal tax rate? If you're in the 32% bracket, you don't actually lose 32% of your income to federal tax.
In reality, you'll pay lower federal rates than this. There are other deductions and tax credits. Capital gains and dividends are also taxed at lower rates. That doesn't change the general idea though. Whatever your marginal rate is, your effective federal tax rate will always be below it, and will often be way below it.
Hopefully this clears up any misconceptions you might have heard similar to the opening questions. If any remain, just let me know in the comments.
This is great. Thanks!
ReplyDeleteIn the first chart annual taxable income vs. post-tax income, having a 1:1 aspect ratio chart could be insightful too.
Very good article and thanks for sharing such information. Already Read your Recent Post, its Great Thanks adoption certificate | return to work | fake doctors note | client information | savings trackers
DeleteOne tax reform issue that requires addressing is the amount of revenue that needs to be raised by the federal tax system. tax preparation
ReplyDeleteNice answers in replace of the question with real point of view and explaining about that. Online Event Registration Form Template
ReplyDeleteThank you for posting something like this keep up the good work. bank islami car finance - faysal bank credit card
ReplyDeleteWe have sell some products of different custom boxes.it is very useful and very low price please visits this site thanks and please share this post with your friends. best tax information site
ReplyDeleteAdditionally, when a star competitor is off the court or field always, it's conceivable to recapture thousands or even millions lost due to overpaid taxes.consulenza fiscale
ReplyDeleteBecause the calendar is continually updated, check back often to keep track of filing requirements, deadlines and other events that will help you stay current and up-to-date. kansas city income tax
ReplyDeleteYou make so many great points here that I read your article a couple of times. Your views are in accordance with my own for the most part. This is great content for your readers. Free Vehicle Collection Services Pangbourne
ReplyDeleteThis particular is usually apparently essential and moreover outstanding truth along with for sure fair-minded and moreover admittedly useful My business is looking to find in advance designed for this specific useful stuffs… Automatic Gearbox Problems Reading
ReplyDeleteThis particular papers fabulous, and My spouse and i enjoy each of the perform that you have placed into this. I’m sure that you will be making a really useful place. I has been additionally pleased. Good perform! https://europa-road.eu/hu/melybolcsos-szallitas-nemetorszagbol.php
ReplyDeleteThis is because of the way that their work would commonly be utilized in a court of law.The valuation of harms because of criminal and common wrong-doings should be finished with flawlessness and consequently information on business valuation hypothesis is the most fundamental. London accountant
ReplyDelete'Land Grab' has become a phrase on everyone's lips and has struck fear into the hearts of many potential buyers - and not a few owners of Spanish property currently living here. corporate investigations in spain
ReplyDeleteVery nice article, I enjoyed reading your post, very nice share, I want to twit this to my followers. Thanks!. axation of US Rental
ReplyDeletecfsasc
ReplyDeleteThanks for sharing the good stuff. It's a good stuff about the marginal tax rate which depends on different random factors. Keep sharing the good work. There are some random questions as well which help you to spend some good time.
ReplyDeleteKıbrıs araç kiralama ve Kıbrıs rent a car şirketi, kiralık minibüs, KKTC Ercan Havalimanı, Lefkoşa, Girne veya otelden araç kiralama için ☎ +90 533 888 2929. kıbrıs araç kiralama
ReplyDeleteYour articles are inventive. I am looking forward to reading the plethora of articles that you have linked here. Thumbs up! Fair Work Australia
ReplyDeleteI think this is an informative post and it is very useful and knowledgeable. therefore, I would like to thank you for the efforts you have made in writing this article. Your Virtual Office London yourvirtualofficelondon.co.uk
ReplyDeleteTo be an effective blogger, individuals are not needed to have broad specialized abilities however it's vital that you have skill in the field that you're expounding on. remote virtual work from home jobs
ReplyDeleteI just found this blog and have high hopes for it to continue. Keep up the great work, its hard to find good ones. I have added to my favorites. Thank You. Estonian company liquidation
ReplyDeleteSince time is important for them, they need not waste their time for rental cars, taxi cabs, or airport shuttles. Instead, they can book airport limo service in advance just by calling any reputable rental limousine service company. Luxury SUV Rental Miami
ReplyDeleteThanks for the blog filled with so many information. Stopping by your blog helped me to get what I was looking for. Now my task has become as easy as ABC. website
ReplyDeleteThank for sharing such a good content. I am very happy to reach to this blog.
ReplyDeleteIf you are bird lover, and looking for some great information to get instant
excess to quality bird related information, you can install the birdfeederist App.