How do marginal tax rates affect the economic prosperity of a nation?
Government tax rates are intertwined with the nation’s economic prosperity. The United States currently uses a progressive tax system, with marginal tax rates imposed on its citizens’ incomes.FactsA progressive tax system has gradually increasing tax rates as individuals earn higher incomes from jobs or self-employment businesses. Marginal tax rates increase at certain thresholds, increasing tax liability on income earned after each threshold is met.FeaturesMarginal tax rates may retard the economic growth of individuals, because they fear paying higher taxes on their incomes. Barely crossing the marginal rate threshold can have significant negative effects on an individual’s income.SignificanceProgressive tax systems may force people to plan for their tax liability rather than wealth creation. Constant tax rate changes may also limit an individual’s disposable income, creating more dependence on government programs.PotentialA popular political theory states that increasing marginal ta
