Need help understanding taxes

1fastredsc · 09-13-2007, 03:55 PM

I need some help understanding taxes, since i may be starting my life long career some day when done with college. Plus it was picking my brain today that i didn't have a solid grasp of it.

Here's the background, so i noticed when receiving my pay stubs in the mail at the same time as my father over the summer while doing ground maitanence for the company he works for. I'd look at my check, and say i made 700 dollars for two weeks, my tax deduction would be around 50-60 dollars, or around 10ish %. Then i'd look at my dad's check and it would be for say 2400 dollars, but his pay before deductions was more like 3500 or something in that range, around 25% (maybe more i am just winging what little i can remember).

My question is what does the taxing curve look like in relation to income? Is it slowly parabolic at first then linear (poor don't pay too much, but then it linearizes at a certain income level)? Does it plateau at some point so that higher income people don't pay the same % of taxes (i hear a lot of dems complaining about the bush tax cut for the top 10% or something to that end)? Do you think the taxing structure is fair?

on-ramp · 09-13-2007, 03:59 PM

yes, the tax structure is fair. T
he rich only pay 15% (capital gains tax) while the rest of us pay 40-50% (combined with hidden, etc).

1fastredsc · 09-13-2007, 04:01 PM

what constitutes rich? 200 or more, 300 or more?

Hugh R · 09-13-2007, 04:07 PM

Top tax rate is 35% I believe. On-ramp, you have it wrong, his dad pays ordinary income taxes and capital gains only if he sells something like a car, stock, etc. for a profit. 1Fastredsc, at that income level you'll probably get most of it back if your not claimed as a dependent on your dad's income tax. You won't get the social security, or disability back. In fact, you'll probably never see social security. A piece of advise, start putting something, anything into a retirement fund now. The power of compound interest over a lifetime is amazing. Even if you only put $5 or $10 away/week. Put it in an IRA so it doesn't get taxed until you retire. If you make over about $65,000/year, the IRS thinks your "Rich".

on-ramp · 09-13-2007, 04:08 PM

Quote:

Originally Posted by 1fastredsc

what constitutes rich? 200 or more, 300 or more?

http://www.moneychimp.com/features/tax_brackets.htm

fed. tax brackets.

btw, rich is over 300-400 a year gross. (according to some people)

Bill Verburg · Bill Verburg's Garage

tax brackets

+ 6.2% SSTAX + 1.42%MEDICARE TAX

+ the employer pays 6.2% + 1.42% too

1fastredsc · 09-13-2007, 04:21 PM

So then what i'm reading both here and on that site, basically says that things are steadily linear from 174k and up. But I also read that bushes capital gains tax was reduced quite a bit with that bill he passed, therefore the big dogs of the wealthy who buy, sell, and trade companies and such would fall into a tax bracket of half the % of the income tax bracket right?

Also how do you feel about wealthier paying more in net taxes? Is it fair to ask from a wealthy person more net taxes than someone else who makes slightly less or should everyone at a certain point pay the same and have the same "contribution", instead of the same percentage of income going to there contribution?

Hugh R · 09-13-2007, 04:27 PM

Considering that I pay more taxes than the average American family even earns, I'd say I pay too much. Just how much more friking police, fire, schools, roads, and other public services do I use than the average joe six pack?

ErVikingo · 09-13-2007, 04:45 PM

Quote:

Originally Posted by Hugh R

Considering that I pay more taxes than the average American family even earns, I'd say I pay too much. Just how much more friking police, fire, schools, roads, and other public services do I use than the average joe six pack?

God bless you my friend. The ES is due on Monday...

AMT is evil, after you pay a very high percentage of your take, pay a very large property tax and don't even use the schools you then are hit with the fact that due to AMT you can't deduct your other taxes paid

Getting back on topic, when you compare your dad's and your check make sure you are not considering deductions other than taxes (apples to apples).

In essence, the system tries to tax everyone similarly but regretfully what actually happens is that the more successful you are the more you pay.

1fastredsc · 09-13-2007, 05:35 PM

Quote:

Originally Posted by ErVikingo

In essence, the system tries to tax everyone similarly but regretfully what actually happens is that the more successful you are the more you pay.

See that's what i'm trying to wrap my head around. Is it better to tax you on a percentage, assuming everything the same, of the work you contribute? Therefore whether you make a lot or a little, 30% of you contribution to society is being taxed no matter what you make. Or should people all pay the same income taxes (those who can) even if the percentage taken from your check is higher than that of someone who makes more? This assumes all citizens equal in how much money they contribute to the government no matter what the actual dollar amount of there worth is.

It seems the tax bracketing system is meant to tax you the same within that bracket no matter the value of your work, it's always a certain percent. However this applies to the working class of people who depend on a steady taxable income. But then the capital gains tax is half the percentage and so now is contradicting the idea behind the bracketing system it seems. So it promotes people to buy, sell, and trade things with a lower taxing rate than to actually be apart of the working class that contributes to society while making an income. This seem right?

Dueller · 09-13-2007, 10:11 PM

Michael Jordan is rich.

They guy who signs his paycheck is WEALTHY

KFC911 · 09-14-2007, 05:51 AM

Quote:

Originally Posted by Dueller

Michael Jordan is rich.

They guy who signs his paycheck is WEALTHY

I've never aspired to be wealthy...just MJ when I was younger

Rick Lee · Rick Lee's Garage

If you know you'll be getting most of your taxes refunded to you, you might as well stop lending the gov't. your money interest free for the year and adjust your W4. That way you get more out of each paycheck and don't get a refund at the end of the year. I'm single with no kids and claim five exemptions. I usually owe the feds about $1100 after it's all said and done, but I usually get that much back from the state, which I file first and then pay the feds off with that money. If you're getting a refund, you're giving the feds an interest free loan. If you're writing them a check at tax time, they gave you an interest free loan.

pwd72s · 09-14-2007, 08:19 AM

All taxation is theft through extortion..."Pay up or we'll hurt you".

Rick Lee · Rick Lee's Garage

Quote:

Originally Posted by pwd72s

All taxation is theft through extortion..."Pay up or we'll hurt you".

I think that's true of income tax, but necessarily of others. With a sales tax, you can always choose not to buy or buy it used or somewhere else. Lots of other taxes are built into prices already. Income tax truly is gov't. extortion for the sole purpose of redistributing wealth. Pretty sad that, when it first became Constitution, the income tax was 1% and only on those making $1 million or more, which was true robber-baron status in those days. Look what it has become. AMT is outrageous.