Tax Bracket

The rate at which an inpidual is taxed. Tax brackets are set based on income levels; inpiduals with lower income levels are taxed at a lower rate than inpiduals with higher income levels. Tax brackets serve as cutoff points for given income tax rates; therefore, if an inpidual's annual taxable income exceeds the cutoff point, that person is taxed according to the next tax bracket.

Most countries tax inpidual incomes using a system of tax brackets. This structure implements what is referred to as a progressive tax system, in which taxation progressively increases as an inpidual's income grows. This contrasts with a flat tax structure, in which all inpiduals are taxed at the same rate, regardless of their income levels.

Proponents of the use of tax brackets and a progressive tax system contend that inpiduals with high incomes are more able to pay income taxes while maintaining a high standard of living, while low-income inpiduals struggle to meet their basic needs, and should be subject to less taxation.

Furthermore, the use of tax brackets has an automatic stabilizing effect on an inpiduals' after-tax income, as a decrease in salary is counteracted by a decrease in tax rate, leaving the inpidual with a less substantial decrease in after-tax income.