Rational Tax Brackets

The Census Bureau Current Population Survey (2017) provides the following information on Household Income, derived from HINC-01. Selected Characteristics of Households by Total Money Income (all races).

By Quartile – Four Tax Brackets

First Quartile (0-25% of Households) have incomes between $0 – $29,999
Second Quartile (26% – 50% of Households) have incomes between $30,000 – $59,999
Third Quartile (51% – 75% of Households) have incomes between $60,000 – $104,999
Fourth Quartile (76% –  100% of Households) have incomes between $105,000 – Greater than $200,000.

A rational four tax brackets would be based on this data adjusted for; adjusted gross income (vice household income) and for single and married filing jointly.  The middle class would be the 2nd (lower middle class) & 3rd (upper middle class) quartiles.

By Quintile – Five Tax Brackets

First Quintile (0 – 20% of Households) have incomes between $0 – $24,999
Second Quintile (21 – 40% of Households) have incomes between $25,000 – $44,999
Third Quintile (41 – 60% of Households) have incomes between $50,000 – $74,999
Fourth Quintile (61 – 80% of Households) have incomes between $75,000 – $124,999
Fifth Quintile (81 –  100% of Households) have incomes between $125,000 – Greater than $200,000

A rational five tax brackets would be based on this data adjusted for; adjusted gross income (vice total household income)  and  single and married filing jointly.  The middle class would be the third quintile ($50,000 – $74,999 total household income).

The lowest tax bracket in each case should should take into account the poverty level, but should not be zero, all income earners should pay a income tax, even if it is only $1.00.

The welfare aspects of the tax code (earned income tax credits, …) should be transferred to Health and Human Services.

Taxing the Wealthy

If it is desired to tax the wealthy, in deference to the Progressives in Congress, then an addition tax bracket could be added to either approach.  The bracket would cover the 7% of households with total income of $200,000 and over.

Visualizing the Data

HouseholdIncome

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