March 06, 2009
With a guarantee that only those making more than $250,000 a year will see a tax increase it is probably a good time to talk about something that has not been a problem for decades: Bracket Creep.Bracket creep is the result of a progressive tax system in an inflationary environment. In a progressive tax system the rate at which income (or whatever the basis for taxation is, but for this discussion it is income) is taxed at a greater rate as income goes up. The increases are incremental in a discreet number of brackets, of which there are currently six. The net effect is that the last dollar earned is taxed at a greater rate than the first dollar earned as long as enough is earned to advance out of the lowest bracket.
So don’t worry – your rising salary will make you rich. And your government will therefore be able to take a large bite of your paycheck.
Posted by: Greg at
01:46 PM
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