Income bracket

Income bracket is a term used in economics and sociology to denote a range of incomes that is used to group people for the purpose of analysis. The concept of income brackets is widely used in taxation and social policy to understand the distribution of wealth in a society.

Definition

An income bracket is a category of income that includes all individuals or households who earn a certain range of income. These brackets are often used in statistics and in the analysis of income distribution. The range of income in each bracket can vary depending on the context in which it is used.

Use in Taxation

In many countries, income tax is levied on a progressive scale, meaning that the rate of tax increases as the taxable income increases. Each range of taxable income is referred to as a tax bracket. In the United States, for example, the Internal Revenue Service (IRS) uses seven federal tax brackets to determine the rate of tax for individuals and households.

Use in Social Policy

Income brackets are also used in social policy to determine eligibility for certain programs or benefits. For example, in the United States, the federal government uses income brackets to determine eligibility for programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP).

Criticisms

Some critics argue that the use of income brackets in taxation can lead to income inequality, as those in higher income brackets are often able to exploit loopholes to reduce their taxable income. Others argue that the use of income brackets in social policy can create a poverty trap, where individuals or households are disincentivized from increasing their income due to the fear of losing benefits.

See Also

• Progressive tax
• Regressive tax
• Flat tax
• Income inequality
• Poverty trap