Can anyone explain what and how a Marginal Tax Rate works ? What Im asking is when Dwight Eisenhower

Can anyone explain what and how a Marginal Tax Rate works ? What Im asking is when Dwight Eisenhower was President the Tax Rate on the ich or the Wealthy was 91% my question is did the Rich according to the Tax Law need to pay 91% of their Income/Money/Wealth in Taxes to the Government ? Under JFK the Tax Rate on the Wealthy was 74% and raised to 39.% Under Bil Clinton when he was President in 1993. Is a Progressive Income Tax Marginal ? Can a Marginal Tax Rate take away all of a Rich Person's Wealth killing their incentive to hire or create jobs ?

(Progressive taxes) taxes that place a greater burden on those best able to pay and little or no burden on the poor. Example is the income tax on individuals.

www.google.com...=en&rlz=1W1ADF ... 40&bih=693

Historical Top Tax Rate

www.taxpolicycenter.org... ... ?Docid=213

Well, the highest marginal tax rate under Republican Dwight Eisenhower was 91 percent. It dropped under JFK to the 70 percent range.

robertreich.org...

reply to post by mikejohnson2006


Why do so many people refuse to look things up on their own?

Marginal tax rate is the tax rate applied to the very last bracket of income.
Hypothetical figures
0-$10,000 10%
10,001-20,000 20%
20,001-50,000 30%
50,001-200,000 40%
200,001 and up 50%

The marginal tax rate is 50% for all money you make past 200,001.

If you make $5,000 your marginal tax rate is 10%.
If you make $100,000 your marginal tax rate is 40%.

A marginal tax rate of 91% means you only put $9 in the bank for every $100 you make in that tax bracket.

Understand?

Most of us likely pay a lower overall rate of tax than what our tax bracket indicates. The reason is because our tax system is progressive. We now have six income tax rates, starting at 10 percent and topping out at 35 percent. And all the ordinary earnings, that is, our wages, are taxed at all those rates. Take, for example, a single taxpayer making $175,000. That total puts that filer in the 33 percent tax bracket, but he doesn't pay 33 percent on the whole $175,000. He pays 10 percent, 15 percent, 25 percent, 28 percent and 33 percent on that money based on the amounts that are covered by the tax brackets. The bottom line is that this hypothetical taxpayer doesn't owe the IRS $57,750, which is 33 percent of $175,000. Rather, he owes Uncle Sam $42,622, which is an effective tax rate of around 24 percent. This is because parts of his earnings are also taxed at rates lower than his top, marginal tax rate of 33 percent. You can see the precise tax bill breakout for our hypothetical $175,000 earning taxpayer in Bankrate's Tax Basics article What's my tax rate? The bottom line is that you can't just rely on your marginal tax rate, which is the tax bracket rate applied to the last dollar you earn. Rather, you need to look at your effective tax rate, which is calculated by dividing the tax you owe by your taxable income amount. Read more: Marginal vs. effective tax rates | Bankrate.com www.bankrate.com...

www.bankrate.com... fective-tax-rates/

Marginal tax isn't a good yardstick to measure any contribution, ie "the 1% pays 40% of the taxes collected!!!"

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride.

www.vanityfair.com...

Our tax code needs to be simplified. We need to ante up in accordance to our income. We need to put an end to special interest groups and lobbyists getting new tax codes added that only benefit a very, very small percentage of folks that can afford to pay for the special interest groups and lobbyists. We need to demand that certain tax code reforms that have quietly appeared over the last couple of decades be ended.

Simplified and fair. Possibly flat also?


--I realized that I didn't give a simple answer. Simply put...

Most people look at the marginal tax rate and assume that is the amount that a person pays. Example: Mr. A earned $500,000. last year so Mr. A must have paid $175,000 in taxes. Not so. Mr. A will pay $148,455 in taxes. www.bankrate.com... So, you can see that a progressive tax rate lowers the overall taxes as one gains wealth. Another aspect to consider is payroll taxes--Social security taxes are capped while medicare taxes are low despite income level. Payroll taxes are one reason that many of the working poor pay much higher effective tax rates than someone like an investment broker might pay. The brokers also have a lot of tricks of their sleeves to defer those taxes.

reply to post by mikejohnson2006


as long as tax rates stay under 101% every dollar more before taxes is a (big or small) fraction of that dollar more in your pocket after taxes.

Also Money isn't an incentive to "create jobs" (Frank Lunz invented that wording. I prefer "Being forced to hire somebody")
Nobody likes to be forced to hire people. It costs money.
The only "incentive" that forces people to hire somebody is if they really can't do the requiered work without additional employees anymore. Every business owner who cares for his bottom line will do anything possible to avoid hiring people.

reply to post by mikejohnson2006


That would be a good question for Richard Nixon, were he still alive.

To sum up narwahl's and Kovenov's answers: Maths make brain hurt. Really guys, the OP wanted clarification, not obfuscation.

The income tax in the U.S is progressive in that the more you earn, the more you will be progressively taxed. So the let's say someone makes $50,000 a year. The first $8,500 is taxed at 10%. Earnings between $8,500 and $34,500 are taxed at 15%. Earnings from $34,500 to $50,000 are taxed at 25%. This last bracket is called the marginal tax bracket of the person earning the $50,000.

You can see the whole table of these brackets here:

Rate Schedule

Originally posted by NiteNGale2
To sum up narwahl's and Kovenov's answers: Maths make brain hurt. Really guys, the OP wanted clarification, not obfuscation.

I already answered in the first post. No idea why anyone is posting "answers" at this point which don't even answer the question.

I also have no idea why the question was asked, it's easy to google it.

reply to post by OccamsRazor04


Because the rates you posted (without a link) appear to be bogus???...please show the 40% or 50% bracket?
en.wikipedia.org...(federal_income_tax)

taxes.about.com...

For 2012, there will be six tax rates of:
•10%,
•15%,
•25%,
•28%,
•33%, and
•35%.

also

Definition of 'Marginal Tax Rate'
The amount of tax paid on an additional dollar of income. The marginal tax rate for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon their earnings, with low income earners being taxed at a lower rate than higher income earners.

Read more: www.investopedia.com...



Either way, the best measure is the EFFECTIVE tax rate which takes into account deductions and loop-holes...it is why Mitt Romney has been paying 14% or less while earning Millions

reply to post by mikejohnson2006


What we found out long ago, is a 90% tax rate is ineffective. People find ways to get around paying taxes through shelters and other schemes. Ideally the tax rate is most effective somewhere between 35- 40%. That is about as high as you can go before it starts to benefit those that want to avoid taxable income.

Originally posted by Indigo5
reply to post by OccamsRazor04

 

Because the rates you posted (without a link) appear to be bogus???...please show the 40% or 50% bracket?
en.wikipedia.org...(federal_income_tax)

taxes.about.com...

For 2012, there will be six tax rates of:
•10%,
•15%,
•25%,
•28%,
•33%, and
•35%.

also

Definition of 'Marginal Tax Rate'
The amount of tax paid on an additional dollar of income. The marginal tax rate for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon their earnings, with low income earners being taxed at a lower rate than higher income earners.

Read more: www.investopedia.com...

edit on 1-11-2012 by Indigo5 because: (no reason given)

edit on 1-11-2012 by Indigo5 because: (no reason given)

Either way, the best measure is the EFFECTIVE tax rate which takes into account deductions and loop-holes...it is why Mitt Romney has been paying 14% or less while earning Millions

edit on 1-11-2012 by Indigo5 because: (no reason given)

Can you seriously not read? I am perplexed by your post, it shows .. well T&C prevent me from saying what I think.

OP did not ask for figures, he asked what the term meant. I provided that information, I stated HYPOTHETICAL FIGURES to explain it. Your post is meaningless.

Originally posted by OccamsRazor04

Can you seriously not read? I am perplexed by your post, it shows .. well T&C prevent me from saying what I think.

OP did not ask for figures, he asked what the term meant. I provided that information, I stated HYPOTHETICAL FIGURES to explain it. Your post is meaningless.

Why on earth would you provide hypothetical Figures? Whatever your problem is...it does not interest me. Peace.