Tax brackets is a term used by accountants and other financial professionals used to describe the levels of which you will be taxed on. Or, what category of tax you will be. We at pay stub direct, have tried not only to make great looking paystubs, but, have created a blog series to educate and have paystub tax brackets explained, amongst everything else explained about the common paystubs
Everyone is taxed that works in this country, but, not all at the same level. This is based on a percentage of your income, and some are higher and some are lower. There are many factors, but, primarily, it's your living status, like Married, couple, single, head of household, etc. and the other part is, how much you make.
Usually states tax people at a higher percentage if they make more. Which is hugely unfair.
We all must pay taxes, and do all our share of work, and if you make more, your share will be larger than the person making less, but, it shouldn't be different.
Saying this another way, is comparing two neighbors that both have pools in their backyard, One is 2x as big than the other. So, in a fair world, the bigger one should accept 2x the amount of kids. If all other things are equal.
It is fair to say, that both pools are handling what they can handle, yes, the bigger pool has more kids, but, based on it's size, it can handle the extra kids because it's extra big.
Therefore, it would be "unfair" to say, that the bigger pool, should take on even MORE kids than the smaller one, basically, the bigger pool will have to work harder to handle the kids. Which makes the owner think, I should never have gotten a big pool, there are way too many kids here.
Of course, the kids don't think it's unfair, because they're happy to be in a pool. Until they grow up, and then get their own pools, and realize they don't want the burden of having all the kids in their pool.
That's how our government works, it punishes someone for getting bigger, or doing better, by taxing them more. In essence, it's smarter to earn a bit less, because you won't be taxed as much.
The POOL's themselves would be considered as tax brackets. small tax bracket and big tax bracket. In the tax world, there are multiple tax brackets. The federal tax is usually about 5-6 brackets, or pools, and states range from ZERO to 8-10.
It's wise to know which tax bracket you are in, and how much money you're going to make this year, if you see yourself approaching the next bracket, it might be wise to slow down, and not work so hard, because you'll be taxed at a higher level. You will in fact, earn less if you work more
to make things easy, let's say there are 2 tax brackets, 0% and then 10%. I know it's oversimplyfying, but, I'm trying to prove a point. and the 10% tax bracket started at 100,000$ Well, if you made 99,999$ this year, you would pay no tax, and bring home 99,999$ this year.
But, let's say you wanted to work one saturday, or stay in the office late one night. and you made an extra $5.
Well, that would make you earning $100,004 Which means you'd be in the next tax bracket of 10%. So, that means, you'd have to pay 10% of $100,000. this equates to $10,000
So, you'd bring home $90,004.
Basically, for working a little extra, you are going to make 10,000 less than the other guy, who didn't work extra.
That's just stupid, anyone will call you crazy for doing that, and you'd have to be crazy to do that. it's silly, but, that's how the Tax bracket system is setup, so, you are truly punished for working extra.
Can you now agree that this system is unfair, and need to change.