Income Tax Brackets, I had no idea
Get Rich Slowly recently ran an article explaining how the income tax bracketing system in the US actually works. I have to admit that I was under the incorrect assumption that you fell into a certain bracket and your income was charged at that rate, and if your earnings changed and you ended up in a different bracket, your rate would change. In reality, the system works in a much more logical way. You are charged the matching percentage for the amount of money you have in each bracket. In other words, if you are just a few dollars above a tax bracket boundary, reducing your taxable income to just below the boundary is only going to save you a couple of dollars in taxes, not a couple of percentage points. As that probably doesn’t make a lot of since how I am explaining it, you should probably just read the article.
While I am personally more in favor of getting rid of the income tax system we have now in favor of an entirely spending-based system, this makes the bracketed income system make much more sense. Rather than being a “you have more, so you pay more” system, the government is actually creating more of a artificial return on investment. Everyone keeps 90% of the first few thousand dollars, and 85 % of the next 20 thousand dollars, and 75 % of next 50 thousand, and so forth. Whether all this is good or bad, I leave for the reader to decide, but I at least like the truth better than my previously held, but incorrect, understanding.