Final answer:
Taxpayers with incomes exceeding $157,500, or $315,000 for married filing jointly, face higher marginal tax rates due to inflation-indexed tax brackets. The highest tax rate is 37 percent after the Tax Cuts and Jobs Act of 2017, with various credits and deductions affecting the final tax rate.
Step-by-step explanation:
The wage-based limits for taxpayers with taxable income in excess of $157,500 (or $315,000 for those filing Married Filing Jointly (MFJ) returns) are influenced by the indexing of the U.S. income tax code to inflation. In this tax structure, as your income increases beyond certain thresholds, you move into a higher tax bracket where the marginal tax rate on additional income rises. This practice aims to ensure that those with higher incomes contribute a proportionally larger share of taxes. However, specific wage-based limits and thresholds can change annually as they are adjusted for inflation.
Following the Tax Cuts and Jobs Act of 2017, the highest tax rate was reduced to 37 percent for top-income earners. It's important to note that these brackets are influenced by a variety of tax credits, deductions, and incentives that can complicate the actual rate paid by taxpayers.