- So you are a bit of a rock and roll fan.
- It is true.
- Now, in your opinion, what's the best rock and roll song
of all time?
- Well, that's easy.
The best rock and roll song of all time
is Sweet Home Alabama by the band Lynyrd Skynyrd.
- Okay, so what's the best rock and roll band of all time?
- That is very easy, the Beatles.
- Agreed.
Now, did you know that the Beatles had a song
about income taxes?
- Yes, I did.
That song was written by George Harrison and titled Taxman.
The song is sung from the standpoint of the taxman.
- Correct.
At one point in the song
the taxman sings to the taxpayer the following,
"That's one for you, 19 for me because I'm the taxman."
- One and 19?
If the taxman gets 19 while the taxpayer gets only one,
that implies a tax rate of 95%.
- Right you are.
When George Harrison wrote the song
the tax rate in the highest tax bracket
in Great Britain was 95%.
- So did everybody have to pay 95% of all their income?
- No.
This brings us to the notion of tax brackets
and marginal tax rates.
- That sounds interesting.
Let's learn about the basics of income taxes.