What do tax brackets represent?

Tax brackets represent ranges of income that are taxed at varying rates. This concept is fundamental to a progressive tax system, where higher levels of income are subject to higher tax rates.

For example, an individual might fall within a specific bracket that corresponds to their taxable income, meaning that income earned within that range is taxed at a particular rate. As an individual's income increases and crosses into a higher bracket, that portion of income within the new range is taxed at the associated higher rate, while the income below that threshold retains the lower rate.

This structure is designed to ensure that those with higher incomes contribute a larger percentage of their income in taxes, aligning with the principle of taxing based on ability to pay. Tax brackets thus create a system that balances fairness and revenue generation for government services and programs.