Tax Bracket

Tax Bracket
The rate at which an individual is taxed. Tax brackets are set based on income levels; individuals with lower income levels are taxed at a lower rate than individuals with higher income levels. Tax brackets serve as cutoff points for given income tax rates; therefore, if an individual's annual taxable income exceeds the cutoff point, that person is taxed according to the next tax bracket.

Most countries tax individual incomes using a system of tax brackets. This structure implements what is referred to as a progressive tax system, in which taxation progressively increases as an individual's income grows. This contrasts with a flat tax structure, in which all individuals are taxed at the same rate, regardless of their income levels.

Proponents of the use of tax brackets and a progressive tax system contend that individuals with high incomes are more able to pay income taxes while maintaining a high standard of living, while low-income individuals struggle to meet their basic needs, and should be subject to less taxation.

Furthermore, the use of tax brackets has an automatic stabilizing effect on an individuals' after-tax income, as a decrease in salary is counteracted by a decrease in tax rate, leaving the individual with a less substantial decrease in after-tax income.


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Look at other dictionaries:

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  • tax bracket — noun a category of taxpayers based on the amount of their income • Syn: ↑income bracket, ↑income tax bracket • Hypernyms: ↑bracket * * * ˈtax bracket f45 [tax bracket] …   Useful english dictionary

  • tax bracket — UK / US noun [countable] Word forms tax bracket : singular tax bracket plural tax brackets a particular range of incomes that are taxed at the same rate …   English dictionary

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  • tax bracket — noun A range over which a piecewise linear, generally progressive, tax is linear …   Wiktionary

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