Wednesday, July 16, 2014

Tax Brackets

I saw a post where someone was advocating a sliding tax scale instead of tax brackets.  The thing is I think many people misunderstand that tax brackets don't mean that two people making $37k and $89k pay the same tax rate, despite both belonging to the 25% bracket.

I wrote a quick perl script to calculate the effective tax rate for taxable incomes $0 - $1,000,000 and plotted it.  Let me stress taxable incomes here, this is after deductions are applied.

Here's another for just up to $100k:

The result is more or less a logarithmic curve, which is realistically the curve you'd end up with using a sliding scale since you couldn't have the rate rise to infinity.  The other alternative would be a logistic curve.

If you thirst for sweet sweet data here it is: