I know that the more money you make the higher the percentage, but is that all there is to it? How do the rich manage to not pay as much? Or do they pay as much?
In: Economics
Let’s dumb down the numbers.
Let’s say you make $100,000 a year.
Let’s say for every $10,000 you make you are taxes 10%
A lot people in that situation would wrongly think “oh no I made 100,000 so all my money is taxed 100%
But that isn’t how tax brackets work
What actually happens is you are taxed according to the income as you earn jt
So you pay $1,000 of the first $10,000. Because 10% of $10,000 is $1,000.
Then you pay $2,000 of the next 10,000 because your next $10,000 is a higher bracket.
This goes until you reach your highest bracket.
Using my example the total amount taxed is $55,000.
If you go by what people usually assume taxes are, all $100,000 is taxed
Latest Answers