From the course: Finance for Non-Financial Managers (2015)
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Tax brackets
- Now we're going to talk about a simple income tax system. We're going to use a lot of terms. For example, we're going to go through and define each one of these, a tax rate and a tax bracket. What's the difference between those two? We're going to talk about these terms and illustrate these terms using a simple tax system. Now in this simple tax system, we have the following criteria. For income from zero to $50, you're not going to pay any tax, no income tax at all. For all income above $50, the income tax rate is 50%. So in this simple tax system, how much income tax would you pay if you made $50 or $51 or $100? Now for all income over $50, you've got to pay a rate of 50%. So this is going to make our calculation very simple. Again, this has all the elements of the tax systems of the United States and the European Union and Hong Kong and China and everywhere else. We'll use this to represent the tax systems…
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