4 ms·

I think the parent was referring to effective tax rate. Tax rates are applied in graded steps, so you will only pay 40% on income over a certain amount.

• jacques_chester 13y ago
  As your total income rises, your effective tax rate converges to the headline marginal rate. (Granted this is a mathematical problem for millionaires, but still...)
  • dripton 13y ago
    Except that the truly rich tend to get most of their income from capital gains rather than wages and salaries, and there's a much lower rate for capital gains than for earned income. The "Buffet pays a lower tax rate than his secretary" problem.
    • jacques_chester 13y ago
      Quite, though the arrangements vary from place to place. There's a lot distortion and unseemly outcomes that flow from having misaligned personal, capital gains and corporate tax rates.
• beefman 13y ago
  Unless you pay the AMT.