windyMagician
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LSDefine
Simple English definitions for legal terms
bracket creep
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A quick definition of bracket creep:
Bracket creep: When prices go up or people earn more money, they might end up paying more taxes. This is called bracket creep. It happens because the government sets different tax rates for different income levels. If someone's income goes up, they might move into a higher tax bracket and have to pay more taxes.
A more thorough explanation:
Definition: Bracket creep is a term used to describe the process by which inflation or increased income pushes individuals into higher tax brackets.
Example: Let's say you earn $50,000 per year and your tax rate is 20%. That means you pay $10,000 in taxes. However, if your income increases to $60,000 per year and your tax rate is still 20%, you now pay $12,000 in taxes. This is because you have been pushed into a higher tax bracket due to your increased income.
Explanation: Bracket creep occurs when inflation or increased income causes individuals to move into higher tax brackets. This means they pay a higher percentage of their income in taxes, even if their income hasn't increased significantly. In the example above, the individual's income only increased by $10,000, but they ended up paying $2,000 more in taxes due to bracket creep.