Chapter P3, Problem 4RQ

To determine

The way through which tax brackets work in the U.S. tax system

Explanation of Solution

According to the tax brackets in the U.S. tax system, for each portion of the income, tax brackets would provide the tax rate that a person is liable to pay.

It works in the U.S. system according to different chunks of the income such as for the first chunk of income, a person pays different tax and for the next portion, a person pays different amount of tax.

For example, in the current year, if a person is single, then he/she would pay lowest tax rate which is 10% is for the first portion of $10,275 of income and the next chunk of that person’s income would be taxed at 12%, and so on, according to the taxable income of the person

Economics Concept Introduction

Introduction: A tax bracket refers to marginal tax rates that provide the range of taxable income and this income is liable to tax under a particular tax rate.