What is last dollar tax?

Last dollar tax refers to a tax system in which the final portion of an individual's income is taxed at a higher rate than earlier portions. This mechanism is often used in progressive tax systems, where higher income levels face increased tax rates. Essentially, it means that only the income over a certain threshold is taxed at the higher rate, rather than the entire income. This approach aims to ensure that those with greater financial means contribute a fairer share to public revenue.