Marginal rates are what taxpayers in a given bracket pay on the portion of their overall income that falls within that bracket’s range, not on their entire income. Overall income and tax brackets are determined after the taxpayer takes deductions such as the mortgage interest deduction or the standard deduction. When a person’s income increases, so does the share of that income owed in income taxes, as shown below.
With tax reform currently under discussion in Congress, what might these rates look like next year? Below are the current income tax brackets and rates compared to the ones proposed in the Senate and House of Representatives. Each system follows the same pattern of increasing tax rates as income increases, maintaining the progressivity of the current American income tax.