HAT Manifesto Part 1/3 - Rubric Cube - 241201 revision

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 4 The Economics of the Public Sector

Chapter 12 of 36 The Design of the Tax System

Section 5 of 22

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Table 3 is a table of marginal tax rates.

With this a taxpayer making a $30,000 income pays

· 10% on the first $7800 = $780

· 15% on the rest $22,200 = $3300

· For a total of $4110 total income tax paid

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Taxable income is net income after tax deductions such as for dependent children and giving to charities.

Individual income tax amount to be paid is calculated using a schedule such as Table 3.

Table 3 shows marginal tax rates, the income tax rate applied to each additional dollar of income.

The marginal tax rate rises as income rises.

Those with higher income pay an increasingly larger percentage in taxes.

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Note each tax rate applies only to income within a range, not to a person's entire income.

A person with an income of $1 million pays 35% on all income over $349,700.

This system of applying increasingly higher tax rates on income is called progressive taxation.

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progressive taxation

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