Underworld wrote: Can you explain how the US tax system works (or maybe a link)? You have to pay tax on multiple levels, Federal, State, (city?), right?
Oiy. I don't have a good link that covers the entire range of taxes so this is off the top of my head:
For individuals we start with Federal "Income taxes". This is a tax levied based on all income (earned and unearned). There are numerous "deductions" that are allowed and then you get to a number called "Adjusted gross Income". If your adjusted gross income is less than a set level you either don't pay in or get refunded any income taxes withheld from your paycheck. Otherwise, the higher your income goes the higher your income tax rate in one of several steps.
Most states also have a state level income tax and they work pretty much the same way. There are a few major cities that also have their own Income taxes for their residents.
We also have what are often called "other payroll taxes" which include Social Security and Medicare taxes. Social Security is billed as a "trust fund" for your individual retirement (it really isn't) but basiclly, you pay in and when you reach retirement age you get a monthly stipend from the government. How much you pay for payroll taxes each month is based on how much you earn and how much you get back at retirement time is calculated based on how long you worked, your level of lifetime income, etc.. Income and payroll taxes are deducted straight from your paycheck and you deal straight with the government in any additional payments or refunds.
Then you have things like sales taxes which are strictly state and local level taxes. These are flat rate taxes applied to purchases. Each taxing authority decides what is or isn't taxable and what the tax rate will be. These are paid at the point of purchase much like the European VAT and teh seller takes care of dealing with the taxing authority.
Then you start getting into "other taxes" and there are thousands of them. You pay a tax on gasoline, cigarettes, alcohol, personal property (i.e. cars, boats, etc..), property taxes on land/real estate, inherticance taxes, etc.. The "sin taxes" (alcohol, tobacco and gasoline) are pretty much set at a flat rate much like sales taxes. Personal property and real estate taxes are based on the value of your property.
It's a big maze.
