How tax brackets actually work


These are tax brackets for 2019. Simple, right? But many of us make a common mistake when
looking at this. Let’s say my income is $84,000. You might think that puts me in the third
bracket. So I would owe the federal government 22%
of my income. This is wrong. And it’s causing us to have uninformed debates
about tax policy. Here’s how it actually works. Let’s go back to my $84,000 income. Now, instead of thinking of tax rates
as brackets, we should think of them as pockets. But first there’s one special pocket we need
to talk about. The money we put in this pocket is not taxed. The government automatically lets single people
put $12,000 in this special pocket — and more for couples. But if you spend a lot of money on things
like medical expenses or charitable donations, you can sometimes put in more. These are called “deductions.” With the $70,000 that’s left over we can
start filling up the pockets. This first pocket has room for $9,700, so
I only pay 10% on this money. Then I pay 12% on the money in the next pocket. And then 22% on the money in this pocket. These are called marginal tax rates. And that’s how these brackets actually work. So if I get a raise, that new money goes into the first pocket with empty space. When space runs out, we put it in the next
pocket. So the raise, and only the raise, would be
partially taxed at 22%. And partially at 24%. So, when politicians say they want to raise
the top tax rate, it doesn’t necessarily mean these pockets — and your money — are affected. They’re talking about the tax rates on the
pockets way over there, which are only used once people have filled
in these smaller one. Marginal tax rates are a pretty simple concept,
once you get the hang of it. So the next time a politician says the government
wants to “take away 70% of your income” just send them this video

100 Replies to “How tax brackets actually work

  1. We've made a follow-up to this video, that examines the reasoning and debate around a 70% marginal tax rate: https://youtu.be/bWRO-M47eCY

  2. How about if we make it so the government can take as little of our income as possible until they agree to stop killing brown people with it and actually use it to better the country?

    No? We'd rather complain about how much money rich people have while all of us live in luxury compared to most of the world? Ok. I guess that's cool too.

  3. This is something a lot try to explain to other's around them and do not really know and UNDERSTAND themselves.Which can cause more TROUBLE then PEOE can handle. THE INTERNAL REVENUE SERVICE is no JOKE and nothing to PLAY with have been there and done that. Most do not REALIZE they are there to HELP YOU not HURT You and ROB YOU the way some say. All the SERVICE CENTERS depending on INCOME LEVEL are happy to HELP YOU FREE of CHARGE , some many PROFESS to have a IN TERMITE KNOWLEDGE of how it WORKS and are usually JACK LEGS who know nothing.I have FRIENDS Aand even FAMILY MEMBERS whom do and have WORKED for them they are GOOD PEOPLE as they say not GHOULS . So even ASKING or TALKING some one who SUPPOSELY knows go to SOURCE it could SAVE a lot of TIME and TROUBLE and possibly MONEY can USE for something else , THINK ABOUT IT.

  4. A lot of men have never heard of the ‘pink tax, why is that?,
    because they are men, the ‘pink tax’, refer to products that are just like
    those products marketed to the general population except they are color coded
    pink, indicating for women only, it starts from birth, baby things for girls
    cost more, its estimated a 7% more than for boys that are color coded blue. The
    Daily Show on Comedy Central did a skit on the subject and failed miserably, it
    featured one of its female comediennes, Desi Lydic, of course she just had to
    be blond dyed, and Representative Jackie Speier, and because of her age, and a female
    member of Congress, her hair was dyed too, all the above was illustrative of and
    confirming the ‘pink tax’ that it not only exist in the market place but in
    comedy too, and how ironical… a sneering, illustration,  paradoxical gone mad…but no one is laughing…this
    is real life…

  5. Good explanation, but a little bit of an oversimplification. As incomes go up, your effective tax rate approaches your marginal tax rate, just because the lower brackets don't mean much anymore. So a 70% marginal tax rate on people earning in the millions turns out to be a 70% effective rate.

  6. How they actually work: I see my tax bracket, now I am on a mission to get out of the rat race as soon as possible. More you make the more they take. If $ = time, time = $. I’m tired of having my life redistributed.

  7. It really is sad that Vox along with other dems have to resort to “you don’t know how taxes work” if you have any sort of objection to tax increases regardless of the amount.

  8. Horrible video explanation, I can just imagine how many people watched and now think they know tax law, brackets.

  9. If you leave out the promotion and use the $84000 as base.
    $70,000 after deductions
    $970
    $3,573
    $6,715.50
    =$11,258.50

    $11,258.50 is about 16.08% of $70,000.
    So, yeah like the video says about the 22% is correct.

  10. Thanks for breaking this down! I really did think that all of that 84,000 would be taxed at 22% #TheMoreYouKnow!

  11. A bit confused, why am I only paying 10% on that first %9.7k? Why is the amount 9.7k? Does it vary from person to person or are these always the set numbers for everyone here in america? (also can I have an answer for the next subsequent tax "pockets" as well?)

  12. So you mean if you have a 90% tax on people who make over $120k/yr they will still work once they get to that bracket so they can keep 10% of there money? I guess this is why Bernie and his communist base are totally clueless. NO the people will stop working once they reach that bracket.

  13. Guess what! We already understand how it works. And no matter how you slice it, it's still our money. Now go further and explain how the top earners are paying the bulk of the tax bill while being told we should pay our fair share.

  14. The point is any tax is too much tax. I understand the government has certain functions to fill and you need to fund this, I can understand that. Anything more than base esentialls is just stealing. Molon labe. The revolutionary war was fought over a 3% commodities tax.

  15. Australia you earn $40000aud = 32% tax ' $95,000 aud = 37% ' $185,000 aud = 45% . Then we have high taxes 13% -51% on cars . Middle class and the rich pay the bulk of the tax to Government

  16. Lol there are people over 18 years old that dont know this? And vox stop pushing socialist ideology please

  17. Most people who make $50000 a year get almost everything they paid in taxes back at tax return….. especially if you have multiple kids.

  18. I learned this by doing taxes myself. I think it's more beneficial for people to learn to do taxes themselves and understand the concept then hire someone else. Knowledge is power, people!
    And it's especially frustrating to argue with people who don't understand what they're talking about.

  19. this video is about the 70% tax yet all i see is a max of 24%. when,if at all does it reach 70%?

  20. Taxation is theft. The Government feeds on the working-class and distribute our earned income into rundown sanctuary cities. Take a closer look into these Democratic states (LA, Seattle, Virginia, Chicago, Detroit, New York, etc.) that has the highest cost of living, highest income tax, high gun violence, and high homelessness rate. These cities were built for celebrities and the rich while the poor remain stagnant paying taxes!

  21. So if this refers to the amount that you come up with after the year is over, how do you arrive at the amount deducted per pay period? Is each paycheck deducted based on a year's projection of what the salary would be based just on the total amount on that paycheck?

  22. So that means that as a single no dependents tax payer I am not actually paying for the prisoners for welfare for the army for the roads and bridges for the streets for the schools and for all the free college and lastly the illegal aliens and the marijuana smokers? Oh really then where is my 32% tax bracket going? Did the Hillary's steal it again

  23. Hahah box telling us how tax brackets work if any of you listen to what vox says you are idiots

  24. Good job Vox. Way to take a good educational video and add a left-leaning political slant to the end.

  25. Is this the one yearly tax or monthly taxes? Cause my family says it’s just the tax bracket for the year. And monthly taxes are different.

  26. You all should text Jeff on 2486338457 to start making extra money. I am making money through him tested and trusted

  27. if you are significantly higher than a 70% bracket then close to that will be taxed overall, its riduculus for any 'pocket' too have 70% taken out of it.
    still i appreciate you actully informing people of how this works.

  28. Excellent video all the way until it was made political. Then 👎🏻. God forbid we make a video allowing people to make their own assessments.

  29. Well, I have to say… I appreciate the knowledge dump! I did not know it was progressive like that.

  30. You know what else leads to uninformed debates about tax policy? The lies you spread about "tax cuts" to the rich in your videos in which you LIE and claim you can write gambling loss off of your taxes, or that you can write off your mortgages etc. as means to pay less. The sheer stupidity from this channel is the reason it's followers are broke.

  31. How they work, the more you make, the more they take. It assumes you don’t work 2 or more jobs or over 40 hrs to make extra. How they keep you on the plantation. Working under the table is the only solution.

  32. If u get pushed into the next bracket and are losing money on ur check just claim a higher exemption number and they will take a few percent less and then ull be see ur raise and ull see that ur taxes are still getting paid. Your welcome.

  33. All taxation is theft regardless until we legalize tax evasion. (Which would make any/all tax payments a consensual transaction)

  34. United States should have a 10/10/10 tax system and people keep asking me what that means:
    What that means is that
    You pay a 10% tax to your city that you live in.
    Then your city pays a 10% tax to the State.
    Then the State pays a 10% tax to the government and doing that would be better living for civilians of the United States and also better wages and more money. Why can’t we do that because that’s what we pay a church is a 10% tithe.

  35. As someone who is PTIN certified by the Gov to do taxes, this doesn't make sense. Technically you are saying if someone has 100k then theyre taxed at 24% until 80k then >24% after that. This is like saying 10k of your money is taxed at 10% then the next portion of your income is taxed at 12% then so on and so forth.

  36. The Human Brain is a wonder. My entire life mines has been. When this video first came out I just didn’t get it. I couldn’t understand. Couldn’t comprehend or wrap my mind around it. It was like watching gibberish and being quizzed on aerodynamics. So I gave up and gave myself time. Half a year later I’m finally fully understand the concept and came back to this video just to confirm. And it makes total sense. I always go through this. Somethings I just don’t get so I give up and give myself time. Usually in a week or a few months I’ll understand it to the tee.

  37. Correct me if I'm wrong but haven't numerous polatitons proposed a 70% top bracket starting at a million dollars? If so a 11 million dollar income would be taxed at roughly 70%. So yes if u are rich they do want to take 70% of your income.

  38. no they still want to take away 70% of whatever you would have made past 10 million. nice try at lying tho (and thats according to one of your own articles)

  39. And then there's state taxes. And VAT. And property taxes. And if you add it all up you're still left in your underwear.

  40. I think that the more you earn in the society that allows u to earn it, then the higher your responsibility is to the welfare of that society. Because without the people in the first place, profits could never be made. This might be seen as a sacred duty. In a more evolved society. To take care of ones neighbor. Ensure the welfare of the species.

    When you enter into the upper brackets you should be paying dues that allow people to get educated and have basics.

  41. Here in north europe we pay high taxes. 33% of our income. This money goes to ensurance, social work, army etc. So with this money, everyone has the right on an esurance so nobody has to suffer extreme debt when they get sick.

    So basicly, we pay to support eachother. How more you earn, how more tax you pay. I think this is a good system. Because we help eachother out.

  42. Im curious, If the first pocket only hold $9700, leaving $60,300 left, the next pockets hold up to $39,475, meaning the second pocket would be $39,475 and not $29,775 as your video says? Why is the last pocket not the difference of $60,300 and $39,475 leaving $20,825 for the last pocket, which is the remainder….??

  43. 2k in deductions tho? Cant just add that has to be 14k in deductions or exceed the 12k standard deduction right?

  44. You are correct in your information about tax brackets, but many of the proposed policies would still require those in the lower brackets to pay a higher percentage with how much they cost. Not 70%, but definitely not 0% either.

    I also think that people wanting things just because they don't have to pay the bill is selfish. Half of Americans already don't pay income taxes and the vast majority of tax revenue already comes from the rich. I would much rather pay more for something I can choose than pay less and have the government choose for me.

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