Tax bracket

From Wikipedia, the free encyclopedia

Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.

Example

Imagine that there are three tax brackets: 10%, 20%, and 30%. The 10% rate applies to income under $10,000; the 20% rate applies to income from $10,001 to $20,000; and the 30% rate applies to all income above $20,001.

Under this system, someone earning $10,000 would be taxed at a rate of 10%, paying a total of $1,000. Someone earning $5,000 would pay $500, and so on.

Meanwhile, someone earning $35,000 would face a more complicated equation. The rate on the first $10,000 would be 10%; the rate from $10,001 to $20,000 would be 20%; and the rate above that would be 30%. Thus, they would pay $1,000 for the first $10,000 of income; $2,000 for the second $10,000 of income; and $4,500 for the last $15,000 of income; in total, they would pay $7,500, or about 21.4%.

Tax brackets in the USA

In 2006, the Federal tax brackets for a single (unmarried) person were:^[1]

• 10%: from $0 to $7,550
• 15%: from $7,551 to $30,650
• 25%: from $30,651 to $74,200
• 28%: from $74,201 to $154,800
• 33%: from $154,801 to $336,550
• 35%: $336,551 and above

This applies only to amounts above the standard deduction of $5,000 for an individual. For example, a single individual would actually pay 0% on the first $5,000, 10% between $5,000 and $12,550, 15% between $12,551 and $35,650, 25% between $35,651 and $79,200, and so on.

To compare how federal tax brackets changed from 1950 to 1980, look at the comparative chart in this link. http://www.stanford.edu/class/polisci120a/immigration/Federal%20Tax%20Brackets.pdf.

Most states also levy income tax, exceptions being Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming; see http://www.taxadmin.org/fta/rate/ind_inc.html.

Tax brackets in the UK

In the 2005-2006 tax year, the tax brackets were:

• 10%: from £0 to £2,090
• 22%: from £2,090 to £32,400
• 40%: from £32,400 and above

This covers income after the personal allowance (£4,895 for single people, meaning that 40% is not paid until more than £37,295 is earned).^[2]

Notes - This does not cover employees national insurance, which is essentially another tax. This is taxed at a rate of 11% for money earned per week between £84 and £645 per week, and 1% for money earned above the £645 per week threshold. For most incomes this tends to work out around an additional 5-10% to the tax rate.^[3]

Tax Brackets in Switzerland

Personal income tax is progressive in nature. The total rate does not usually exceed 30%.

The Swiss Federal Tax Administration website [1] provides a broad outline of the Swiss tax system, and full details and tax tables are available in PDF documents.

The complexity of the system is partly due to the fact that the Confederation, the 26 Cantons that make up the federation, and about 2 900 communes [municipalities] levy their own taxes based on the Federal Constitution and 26 Cantonal Constitutions.

Tax brackets in New Zealand

New Zealand has the following income tax brackets (as of May 2006). All values in New Zealand dollars. (With earner levy included):^{[citation needed]}

• 19.5% up to $38,000
• 33% from $38,001 to $60,000
• 39% above $60,001
• 46.3% when the employee does not complete a declaration form (IR330)

Earners ACC Levy for the 2006 tax year is 1.3%

Tax brackets in Canada

Canada's federal government has the following tax brackets for the 2006 tax year:

Federal Tax Rates for 2006:http://www.cra-arc.gc.ca/tax/individuals/faq/taxrates-e.html#federal

• 15.25%: on taxable income of $36,378 or less
• 22%: on taxable income of more than $36,378, but not more than $72,756
• 26%: on taxable income of more than $72,756, but not more than $118,285
• 29%: on taxable income of more than $118,285

Each province adds their own tax on top of the federal tax.

Provincial / Territorial Tax Rates for 2006:http://www.cra-arc.gc.ca/tax/individuals/faq/taxrates-e.html#provincial

Tax brackets in Australia

 

2005-2006

The income tax is administered by the Federal government in Australia. The tax brackets for the financial year 2005-2006 are as follows:^[4]

• 0%: from $0 to $6,000
• 15%: from $6,001 to $21,600
• 30%: from $21,601 to $63,000
• 42%: from $63,001 to $95,000
• 47%: $95,001 and above

These tax brackets are for Australian residents, and do not include the 1.5% Medicare levy. All figures are in Australian Dollars.

 

2006-2007

The Federal budget in May 2006 announced new tax rates for the 2006-2007 financial year. They are as follows :^[4]

• 0%: from $0 to $6,000
• 15%: from $6,001 to $25,000
• 30%: from $25,001 to $75,000
• 40%: from $75,001 to $150,000
• 45%: $150,001 and above

Again, the tax brackets do not include the 1.5% Medicare levy. All figures are in Australian Dollars.

References

1. ^ Federal Tax Brackets. Edward Jones Investments. Retrieved on 2006-08-30.
2. ^ http://www.hmrc.gov.uk/rates/it.htm
3. ^ http://www.hmrc.gov.uk/rates/nic.htm
4. ^ ^{a b} Individual income tax rates. Australian Tax Office. Retrieved on 2006-08-30.