taxation

[BigV]

Yes, Clodfobble is incorrect, this time.

According to the IRS (Internal Revenue Service) we have six tax brackets. Here's a link to the Rate Schedule (a listing of the tax brackets).

2010 Tax Rate Schedules

Step one, find your taxable income. It will be a single dollar value.

Step two, find which ONE range into which your taxable income fits among the six choices below.

It is either:

If your taxable income is between $0 and 8,375, the tax owed is:
$0
plus
10% of the amount over $0.

-OR-

If your taxable income is between $8,375 and 34,000, the tax owed is:
$837.50 (10% of the income between $0 and 8,375)
plus
15% of the amount over 8,375.

-OR-

If your taxable income is between $34,000 and 82,400 the tax rate is 25%
$837.50 (10% of the income between $0 and 8,375)
$3843.75 (15% of the income between $8,375 and 34,000)
plus
25% of the amount over $34,000

-OR-

If your taxable income is between $82,400 and 171,850, the tax owed is:
$837.50 (10% of the income between $0 and 8,375)
$3843.75 (15% of the income between $8,375 and 34,000)
$12,100.00 (25% of the income between $34,000 and 82,400)
plus
28% of the amount over $82,400

-OR-

If your taxable income is between $171,850 and 373,650 the tax owed is:
$837.50 (10% of the income between $0 and 8,375)
$3843.75 (15% of the income between $8,375 and 34,000)
$12,100.00 (25% of the income between $34,000 and 82,400)
$25,046.00 (28% of the income between $82,400 and 171,850)
plus
33% of the amount over $171,850

-OR-

If your taxable income is $373,650 and up the tax owed is:
$837.50 (10% of the income between $0 and 8,375)
$3843.75 (15% of the income between $8,375 and 34,000)
$12,100.00 (25% of the income between $34,000 and 82,400)
$25,046.00 (28% of the income between $82,400 and 171,850)
$66,594.00 (33% of the income between $171,850 and 373,650)
plus
35% of the amount over $373,650.

It looks complicated, but it isn't. The chart at the IRS consolidates the "taxes owed" into one aggregate figure, which I have broken out here for clarity. You can add up the individual amounts in the lower tax brackets and come up with their total. This clearly shows that our system is a progressive one, where the different ranges of income are taxed at different rates. Even Warren Buffett pays the 10% rate (on the first $8,375).