Can anyone explain what and how a Marginal Tax Rate works ?

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Can anyone explain what and how a Marginal Tax Rate works ? What Im asking is when Dwight Eisenhower was President the Tax Rate on the ich or the Wealthy was 91% my question is did the Rich according to the Tax Law need to pay 91% of their Income/Money/Wealth in Taxes to the Government ? Under JFK the Tax Rate on the Wealthy was 74% and raised to 39.% Under Bil Clinton when he was President in 1993. Is a Progressive Income Tax Marginal ? Can a Marginal Tax Rate take away all of a Rich Person's Wealth killing their incentive to hire or create jobs ?

(Progressive taxes) taxes that place a greater burden on those best able to pay and little or no burden on the poor. Example is the income tax on individuals.

http://www.google.com/#hl=en&rlz=1W1ADF ... 40&bih=693

Historical Top Tax Rate

http://www.taxpolicycenter.org/taxfacts ... ?Docid=213

Well, the highest marginal tax rate under Republican Dwight Eisenhower was 91 percent. It dropped under JFK to the 70 percent range.

http://robertreich.org/post/257309173

The top tax rate in 1950 was $200,000 which had a 91% marginal tax is the equivalent to about $1,862,072 in money today. I believe that marginal tax rate taxes money after a certain point, correct me if I am wrong. So while money you made beyond $200,000 was taxed a 91% rate in 1950, the first $2000 you made was taxed at 20% and the next $2000 you made was taxed at 22% and it gradually got higher until you get to 91%. There were far more tax brackets back then. The effective overall rate was MUCH lower than 91%.

Back then there were so many exemptions and deductions that some of the very rich didn't pay a dime. That's why they started the alternative minimum tax.

The marginal tax rate is the tax you pay on the next dollar you earn. In the USA, federal tax is paid in brackets - from $x to $x+n1, you pay $a tax per dollar. Then from $x+n1 to $x+n2, you pay $b per dollar. And so on. Your marginal rate is the highest bracket you're in, but you don't pay that rate on every dollar you earn. The term "marginal rate" is used to have a simple way to refer to this complex structure without having to explain it every time. Income tax is paid on money earned as employment income. Capital gains tax is paid on investment income.

High tax brackets are generally preferred by progressives and liberals. They believe that the rich owe a debt to society and ought to pay a part of their wealth to the government so it can be distributed for the betterment of society. Lower tax brackets are generally preferred by conservatives, who believe individual choices about investing and spending money benefit society more than the government doing it. This is the main economic ideological divide in the USA. Currently, both political parties are squarely in the tax-and-spend big government camp, so there is not a whole lot of choice.

Historically, there were fewer rich people and limited opportunities for capital gains investment, and capital gains taxes were incredibly high. As investment opportunities for middle-class investors have become more widely available, capital gains taxes have gone down. And special middle-class exemptions have been added, so that the sale of a primary residence (up to a certain amount) isn't taxed.

A progressive tax rate means the rich are taxed at a higher rate than the poor. This is in contrast with a flat tax, a single rate that everyone pays. Most people aren't rich, so most people consider this somehow unfair, and the USA has never adopted a flat tax.

The two are not mutually exclusive. If we implemented a flat tax in the USA, it would likely also have marginal rates with different brackets because people just do not think it's fair for a tradesman to pay the same tax rate as an investment banker.

Next week, we'll look at fiat currency and military power. (Just kidding!)

Different rates apply between different thresholds. No one ever paid anywhere near 90% of their income in taxes. The ultra-wealthy gamed the system to avoid having to count any income in the uppermost bracket as taxable personal income. Just like today, most income of the ultra-wealthy was capital gains, but the capital gains tax rate was 25% instead of 15%. The middle class paid higher amounts than today as well.