Thread: Election Tax Quiz

The politicians talk about taxes to get votes. Show that you know how tax rates will affect your paychecks.

Question:

You make $32,600 per year before taxes. A presidential candidate would like to raise the tax rate of those making over $32,550 a year. Assume $3,000 of deductions. Will your taxes go up? Please answer in the poll.

Well I guess that I'm wrong, because everyone else gave a different answer. I just figured that the new tax rate applied to gross income, not net.

Originally Posted by Consultant

I said "Stay the same" because the $3k in deductions would reduce your taxable income to $29,600 which is below the $32,550 rate threshold.

Ipso-facto, your taxes are not affected.

You could claim a lousy $50.01 in charitable gifts to The Salvation Army with no receipts and still have your income below the $32,550 threshold.

I voted the same.

A common misperception is that a tax rate applies to all earnings. Here is what many believe:

Assume the tax rate is 10% up to $30,000 and 15% for everything over that. Many people beleive that a person making $30,000 would pay 10% of that or $3,000 and that a person making $30,001 would pay 15% of that or $4500. That would mean the person making more money before taxes actually brings home less money after taxes, which is illogical. Still, many people say that they don't want a raise because it will push them into a higher tax bracket and they will end up taking home less money. That simply isn't true.

Our tax rates are graduated. That means that a particular tax rate is only paid on the portion of the income that falls within the associated income level.

In the example above, the person making $30,001 would actually pay
$30,000 * 10% = $3,000
$1 * 15% = $0.15 +
________________________
$3,000.15

The person in the higher tax bracket would therefore only pay an extra fifteen cents.



In the quiz at the top of the thread, the person would take home the same amount of money even if the tax rate goes up. That's because his taxable income is $32,600-$3,000=$29,600, which puts him under the tax bracket that went up.

Originally Posted by Consultant

i think i spoiled his fun.

You can't spoil my fun. I pleasure myself.

Wait, that didn't come out right.