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Finance: What is a Tax Bracket? 24 Views
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Description:
Tax brackets set the incremental rates at which the financially more successful are taxed.
- Social Studies / Finance
- Finance / Financial Responsibility
- College and Career / Personal Finance
- Life Skills / Personal Finance
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Personal Finance
- Courses / Finance Concepts
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Credit
- Terms and Concepts / Econ
- Terms and Concepts / Real Estate
- Terms and Concepts / Regulations
- Terms and Concepts / Tax
Transcript
- 00:00
finance a la shmoop what is a tax bracket alright taxes maxes who needs
- 00:09
them right well in this country we live under what is called a quote progressive [Map of USA appears]
- 00:14
tax system unquote and yes it is a politically charged name like
- 00:19
progressive sounds like it can't possibly be a bad thing but can it well [Progressive in the fire]
- 00:24
in the taxes sense progressive means that the more money you make the more
Full Transcript
- 00:29
you get taxed which can be viewed as a punishment for being financially
- 00:34
successful where's Ayn Rand anyway to help us celebrate mediocrity sloth and [Ayn Rand appears]
- 00:39
socialism hmm okay okay we're just framing tax brackets here don't get all
- 00:43
in a tizzy it's the brackets that set the
- 00:46
incremental rates at which the financially more successful are taxed
- 00:51
and those tax brackets change all the time so we won't even bother with the [Tax bracket transforms into cocoon]
- 00:55
real numbers of today as we're sure they'll be totally different in a few
- 00:59
years but the basic idea is that as in the following completely made-up example
- 01:03
you'll pay federal income taxes of zero tax in bracket one here on the first and
- 01:10
a seven grand that you earn move over to bracket two and from seven grand to 20
- 01:15
grand you'll pay 10 percent tax or ten percent on that incremental 13 grand or
- 01:20
1,300 bucks move to bracket three and from 20 to 50 grand you'll pay 20 [Income tax bracket table appears]
- 01:25
percent or six grand tax on that 30 grand spread from 20 to 50 right here
- 01:30
move to the next bracket which will cleverly named 4 and you pay 30 percent
- 01:34
tax from 50 grand to 120 grand or 0.3 times at 70 grand spread or 21 in
- 01:41
taxes at bracket 5 in this very made-up example you'll pay 40 percent tax from a
- 01:46
hundred 20 grand to infinity so if you made half a million dollars last year
- 01:50
chasing corporate ambulances as a sewer you know a lawyer who sues corporations [Lawyer chasing ambulance in a car]
- 01:56
when their stocks go down then you'll pay 40 percent tax on the last three
- 02:01
hundred 80 grand you earned or point four times three eighty or a hundred
- 02:04
fifty two grand so why do the brackets matter like why do some people whine on
- 02:10
and on about how making that extra 112 dollars
- 02:13
will put them into the next tax bracket and well then they're really screwed why [Man crying in office chair]
- 02:18
oh why because they're idiots or at least they didn't watch this video
- 02:22
because the next tax bracket on its own doesn't mean anything other than the
- 02:26
fact that on the incremental dollars you earned you'll pay taxes at that higher [Earnings bracket highlighted]
- 02:31
rate so in the immortal words of Iran well okay yeah she isn't saying much
- 02:36
these days never mind [Ayn Rand grave appears]
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