The following table shows the year 2000 Federal Tax Rate...

The following table shows the year 2000 Federal Tax Rate Schedule for single filers: $$ \begin{array}{|r|r|r|r|r|} \hline \text { Over } & {\text { Not over Amount }} & \text { Plus \% } & \text { Of amt. over } \\ \hline \$ 0 & \$ 26,250 & \$ 0 & 15 \% & \$ 0 \\ \hline \$ 26,250 & \$ 63,550 & \$ 3,937 & 28 \% & \$ 26,250 \\ \hline \$ 63,550 & \$ 132,600 & \$ 14,381 & 31 \% & \$ 63,550 \\ \hline \$ 132,600 & \$ 288,350 & \$ 35,787 & 36 \% & \$ 132,600 \\ \hline \$ 288,350 & - & \$ 91,857 & 39.6 \% & \$ 288,350 \\ \hline \end{array} $$

The following table shows the year 2000 Federal Tax Rate Schedule for single filers:
$$
\begin{array}{|r|r|r|r|r|}
\hline \text { Over } & {\text { Not over Amount }} & \text { Plus \% } & \text { Of amt. over } \\
\hline \$ 0 & \$ 26,250 & \$ 0 & 15 \% & \$ 0 \\
\hline \$ 26,250 & \$ 63,550 & \$ 3,937 & 28 \% & \$ 26,250 \\
\hline \$ 63,550 & \$ 132,600 & \$ 14,381 & 31 \% & \$ 63,550 \\
\hline \$ 132,600 & \$ 288,350 & \$ 35,787 & 36 \% & \$ 132,600 \\
\hline \$ 288,350 & - & \$ 91,857 & 39.6 \% & \$ 288,350 \\
\hline
\end{array}
$$

Key Concepts

Marginal Tax Rate

This concept refers to the tax rate applied to the last dollar of income earned. In a progressive tax system, income is divided into segments or brackets, and each segment is taxed at a different rate. The marginal rate is crucial for understanding how additional income affects overall tax liability, as earning more money might push an individual into a higher tax bracket where the rate on additional income is increased.

Tax Brackets

Tax brackets are income ranges that determine the rate at which income is taxed under a progressive tax system. Each bracket correlates with a specific tax rate, and taxpayers pay a different percentage of tax on income within each bracket. Understanding these brackets is important for calculating total tax liability and planning financial strategies related to income.

Progressive Taxation

A progressive tax system is one in which the tax rate increases as the taxable income increases. This means that individuals with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes. The goal is to reduce income inequality and ensure that taxpayers contribute to public revenue in proportion to their ability to pay.

Base Tax Amount Method

This method involves calculating tax by taking a fixed base tax amount for each income bracket and then adding a percentage of the amount by which the income exceeds the lower bound of that bracket. It simplifies the process of determining the overall tax due by breaking it down into a constant part and a variable part that depends on the excess income, making it easier to compute tax liabilities accurately.

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