People are taxed in different ways. Most Americans pay a variety of taxes such as Social Security tax, medicare, state income tax, property tax (directly or indirectly depending if you rent), and sales tax. Some of the ultra wealthy, like Warren Buffet pay different kinds of taxes (capital gains) which is why his effective tax rate is lower. Most of those that fall into this category only represent about .1% of society.
As far as federal income tax rates...
Tax rates progressively increase as income increases. However, the increasingly higher tax rates apply only to the income in each range, which is called a tax bracket. Also, the tax rates apply only to taxable income. Various adjustments and deductions, including the standard deduction and personal exemptions, all lower a person's taxable income. Taxable income is almost always less than your total income.
To complete the homework assignment, CLICK HERE to understand tax brackets, and CLICK HERE to understand what you will pay in taxes and what percent of your taxable income (income after deductions and exemptions) you will pay. CLICK HERE to understand deductions.
1. Assuming you are filing single, how much will you pay in federal income taxes if you earn $43,000 a year of taxable income (income minus deductions and exemptions)? 5 points
2. Assuming you are married filing jointly, how much will you pay in federal income taxes if you earn $43,000 a year of taxable income (income minus deductions and exemptions)? 5 points
3. Assuming you are filing single, how much will you pay in federal income taxes if you earn $610,000 a year of taxable income (income minus deductions and exemptions)? 5 points
4. Define deductions, provide three examples of deductions, and explain how each effect the amount of money tax payers pay in taxes. 5 points
Extra Credit: Switching gears to corporate taxes. Did you know that from 1998-2005, two-thirds of corporations did not pay taxes. Why? For extra credit, print an article that explains the ways in which corporations can avoid paying taxes.
P.S. - The Ohio State Income Tax is NOT flat and the tax rate has gone DOWN in the last eight years. Additionally, federal income taxes have also gone DOWN in the last eight years.
