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Cake day: July 3rd, 2023

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  • I think another thing the other posters haven’t hit on yet is that Americans pay income taxes in two forms: one to the Federal/National government and then one to the state/locality government in which they live1.

    Your taxes are “progressive” where each level is increasingly higher rates. So for example,2 let’s say you make $50,000 dollars a year and you’re filling as a single adult. The first 10 grand don’t get taxed, so you don’t owe any money yet. The next ten grand are taxed at 10% so you owe the government 10,000*.10=1,000. Then the next 10 thousand dollars are taxed at 15%, so you owe the 1000 from before plus an additional 1500 for a total so far of 2500. We continue this pattern until you have no more income to report.

    BUT then! You also have credits where you tell the government that you can take X dollars of income off your total income because you did something they liked, such as gift to a tax deductible charity, had a kid, bought an EV, whatever.

    So the goal with Americans is to go around collecting credits to lower their income to be the next level lower and collect a bigger refund. The government makes money holding the refund and collecting interest off it.

    1. yes there are states without income tax, but let’s not dwell on that. The states that have income tax work just like the federal ones, except different rate thresholds, credits, etc.

    2. all the following numbers are made up, this is not legal or tax advice, never believe anything you read on the Internet.