U3L1 - Intro to Taxes

Progressive

Regressive

Proportional

1. Your income is taxed at the highest rate that applies to your income amount (e.g. all of your income is taxed in the highest pocket)

1. Your income is equally split among the tax brackets (e.g. divide your income by # of brackets and apply the rates of each tax bracket)

1. Your income is always taxed at the lowest rate of that tax year (e.g. all of your income is placed and taxed in the first pocket)

1. Your income may fall into more than one tax bracket, so more than one tax rate can apply (e.g. fill up the first pocket and then move to the next pocket)

1. LOWERS a person's tax liability by LOWERING their taxable income

1. INCREASES a person's tax liability by LOWERING their taxable income

1. INCREASES a person's tax liability by INCREASING their taxable income

1. has no impact on the amount of taxes a person pays

1. The standard deduction reduces your tax liability

1. Portions of your income are taxed at different rates, called marginal tax rates

1. When the government wants to increase tax rates, it is usually referring to the rates for the highest tax brackets

1. The tax rate of the highest tax bracket your income falls into is applied to your whole income