It’s tax season in the US. It feels like it’s always tax season, since we’re always debating taxes, but now’s when we’re actually doing our own personal returns.
Last year the White House put up a calculator to show the breakdown of where taxes go in the system. It’s still up, even if it’s a bit out of date, and I plugged in some numbers.
Tax policy can be boring and complicated. It also affects society. The US has varied tax rates (and it’s certainly not alone in that) for the federal income tax. It also has a flat payroll tax on wages for Medicare and on the first $110,100 earned for Social Security.
What does this mean in practice?
- Many low-income people pay more on the payroll taxes than they do on federal income tax.
- Investment income has no payroll tax and often has lower tax rates.
I have a higher-than-average income from my job and no investment income, so I pay the payroll and income taxes. OTOH, I live in Washington State, so I don’t have a state income tax.