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The US House just adopted a bill that would establish four income tax brackets. The US Senate just adopted a bill that would establish seven income tax brackets. A conference committee will have to reconcile that difference. What are the arguments for either position?

  • I don't think there'd be any (good) arguments one way or the other solely on this specific topic. In other words, the arguments would be entirely dependent on the larger context. – user1530 Dec 4 '17 at 19:23
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Two things for reference to begin: the US currently has 7 tax brackets, and you are not taxed at your highest possible tax rate for all your income - if you make $50,000 you pay 10% taxes on the first $9,325, 15% on everything between $9,326 and $37,950, and 25% on the rest (source for brackets)

The arguments for more tax brackets is that they allow for a more progressive tax structure. Historically there were far more tax brackets. There were 20-30 tax brackets for most of the 20th century which allowed the somewhat-rich to be taxed less than the super-rich (Reagan changed this). If more tax brackets were added today they would presumably be added back into these same upper ranges, as the majority (about 70%) of Americans make less than $50K which is encompassed by the first three tax brackets.

There are two different general arguments for less tax brackets, one practical and one ideological. The practical argument is that it would simplify taxes, which is technically true but the mess of taxes comes from calculating tax credits, deductions, and other facets of the tax code. Calculating your tax bill based on brackets after you have your income calculated is high-school math.

The ideological argument for less tax brackets is that people shouldn't be taxed more for making more money. The proponents and opponents of this argument are obvious, but I believe that's outside the scope of this question.

To answer your question directly in this specific context, the House wants to reduce the number of brackets while the Senate does not want to touch this particular topic. The House is more polarized than the Senate and thus the conservative writers of the bill are on average more radical than their senate counterparts, so a more radically conservative bill would be unsurprising. I cannot speak as to why the Senate has elected not to change the number of tax brackets in their bill, but seeing as its not really a contributor to the actual complexity of the tax code they purport to be tackling they may be of the mentality "if it ain't broke don't fix it".

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    "why the Senate has elected not to change the number of tax brackets in their bill" - dare I suggest general laziness, the hallmark of all truly great software developers? "Reuse!" :) – user4012 Dec 4 '17 at 19:55
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    We can be sure that it's not that it was too expensive. The extra Senate tax rates are generally lower than the House rates, not more. I.e. the Senate version is more expensive than the House version (in terms of the tax brackets; they may be cheaper elsewhere). – Brythan Dec 4 '17 at 20:01
  • Thanks for the detail Brythan, I'll change my answer accordingly – Gramatik Dec 4 '17 at 20:11
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    For the sake of clarity: With a taxpayer filing as a single and taking standard deduction and exemption and "making" 50,000. Your taxable income is 39,600. It is that amount that is subject to the tax tables. BTW, there is no math required to determine the tax owed, as the tax tables has already calculated it. – BobE Dec 5 '17 at 1:42
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    @grammatik, to summarize your answer: Because there is no "math" involved to calculate tax owed for the vast majority of taxpayers (e.g. those with taxable incomes 100,000 and less), increasing or decreasing the number of tax brackets has no significance. The only difference then is the degree of progressiveness. Reducing the number of brackets tends to make the tax schedule less progressive, while increasing the number of brackets tends to make the tax schedule more progressive. – BobE Dec 5 '17 at 5:09

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