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A marginal tax rate is a form of a progressive tax. Any progressive tax is a tax created based on the amount of income an individual has earned. With a marginal tax rate, each dollar the individual earns places him into a bracket or category resulting in a higher tax rate once the dollar amount reaches a particular limit in that category. The overall outcome is that higher earners pay a higher percentage of taxes and more money in taxes than do middle or lower income earners. This system is exemplified by the income taxes paid to various levels of government. Tax rates vary based on the amount of income. The lower end of the income scale may result in an individual paying as little as 10% in taxes, while those in the highest income categories may pay up to 35% or more in income tax.

As with any government policy, progressive tax rates have critics. Some say progressive taxation is a form of inequality and amounts to a redistribution of wealth, as higher earners pay more to a nation that supports more lower-income earners. Those who oppose progressive taxes often point to a flat tax rate as the most appropriate alternative. A flat tax rate requires all individuals to pay the same tax rate, regardless of income. Proponents of such rates believe they stimulate the economy more by encouraging people to work more, as well as spend more. They believe businesses are likely to spend and invest more as well under a flat tax system, putting more dollars and relief into the economy.

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