The federal income tax is applied to taxpayers in a progressive manner; additional taxpayer earnings are subjected to higher rates under published Tax Rate Schedules. For example, Taxpayer A, earning $10,000 annually, may be completely exempt from federal income tax liability while Taxpayer B, earning $500,000 annually, will likely fall within the Internal Revenue Code’s highest tax bracket. The logic behind the progressive income tax system is simple; low-income taxpayers should be expected to give a smaller proportion of their income to the federal government than higher-earning taxpayers because, presumably, they cannot afford to pay high rates without facing financial hardship.
The Code’s current Tax Rate Schedules, listed under Revenue Procedure 2013-15, stipulate seven tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. These brackets are used to apply the income tax rate in a progressive manner; additional taxpayer earnings are subjected to higher rates. For example, a low-income taxpayer may fall within the 10% bracket while a more fortunate taxpayer may be subjected to rates as high as 39.6%.
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