What is the financial result if you move into a higher tax bracket? Select an answer: You will have less money after the higher tax rate is applied than you would have in a lower tax bracket. You will fall above the average tax rate in the United States. You will no longer be involved in a marginal tax rate. You will still have more money, even after taxes, than you would have in a lower tax bracket.

Question

25-03-2024
Mathematics

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What is the financial result if you move into a higher tax bracket? Select an answer: You will have less money after the higher tax rate is applied than you would have in a lower tax bracket. You will fall above the average tax rate in the United States. You will no longer be involved in a marginal tax rate. You will still have more money, even after taxes, than you would have in a lower tax bracket.

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sqdancefan sqdancefan · Answer 1 · 2024-03-25T23:08:06+01:00

Answer:

(d) You will still have more money, even after taxes, than you would have in a lower tax bracket.

Step-by-step explanation:

You want to know the financial result if you move into a higher tax bracket.

Tax brackets

In the US, the income tax rate increases as income increases. Those with income below a certain level may pay 10% of their taxable income, while above a certain level, the tax rate may be as much as 37% of taxable income. Even so, increased income results in increased after-tax income.

Thus, in moving to a higher tax bracket, you will still have more money, even after taxes, than you would have in a lower tax bracket — choice D.

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Additional comment

The attached graph shows the after-tax income as a function of taxable income using the 2023 US income tax brackets for a single filer.

You will notice the slope is positive everywhere, meaning you still take home more income even after moving to a higher bracket. The "tool-tip" indicates someone with taxable income of $600,000 would have an after-tax income of about $417,668. In this highest tax bracket, you get to keep $0.63 of every taxable dollar.