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    Marginal tax rates explained

    A couple paying taxes on $400,000 is taxed at the highest marginal tax rate, 35 percent for 2012, for only a portion of their income. Their effective tax rate is much lower. Why? It’s explained in the IRS table for married individuals filing jointly for 2012:

    If taxable income is ... the tax is:

    Not over $17,400: 10 percent of the taxable income.

    Over $17,400 but not over $70,700: $1,740 plus 15% of the excess over $17,400


    Over $70,700 but not over $142,700: $9,735 plus 25% of the excess over $70,700

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    Over $142,700 but not over $217,450: $27,735 plus 28% of the excess over $142,700

    Over $217,450 but not over $388,350: $48,665 plus 33% of the excess over $217,450

    Over $388,350 the excess over $388,350: $105,062 plus 35% of the excess over $388,350

    So even without any deductions or exemptions, the couple making $400,000 would pay about 27 percent, or $109,140.