The Tax Rate Of The United States

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1. Imagine a friend says that he doesn’t want to take a job that pays slightly more money only because he will be bumped into the next tax bracket and end up taking home less income after taxes. Based on the video Engager you watched in Unit 2, how would you advise this friend? Define marginal tax rates. Then, explain why tax rates in the United States were designed to be marginal.
➢ A progressive tax, which the friend would be under in this situation, is one in which those with the highest incomes pay the higher tax rate (Video Engager 2). I would advise this friend to take a closer look at the situation; just because he is earning more money does not necessarily mean he will lose more of what he earns to taxes. Instead, different safety features are built into the process to ensure that those who earn more are not prevented from working harder or getting a promotion. For example, those with a higher income can be incentivized through tax breaks from giving to charity or even saving for retirement (Video Engager 2). These benefits encourage those in the higher income brackets to continue to be motivated to earn more. In addition, the tax rates on higher income are marginalized. Marginal tax rates mean that a high-earner will only pay the higher tax on the portion of money that is above the tax bracket. In other words, everyone will pay the same percentage of tax on the first bracket of income, any income above that bracket will be taxed at a slightly higher rate, and
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