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
First off, they’re marginal brackets, meaning you only pay the higher rate for dollars earned over that threshold, not your entire income. Everybody pays the same tax rate on the same dollar earned, you just pay more on the subsequent dollars earned, so whether you earned $50k or $500k, you still pay the same on that first $50k of income.
Some rich pay a lower percentage because they have businesses and can write off some expenses, like a car lease. Others make most of their money from capital gains, which are taxed lower than most income. And other see wealth grow on shares owned but don’t owe taxes until they sell, and can even borrow against shares to fund living expenses at a small interest rate while watching shares continue to appreciate in value.
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