Taxes

Federal

  • individual income tax

    • enarned income (7 brackets - 10% to 37%)

    • short and long-term capital gains

    • estate (exempt up to 23 milion)

    • gift taxes (exempt up to $32,000 per couple)

  • corporate income tax-21%

  • excise taxes - cigarettes, alc, gas, plastic bottles, hotel rooms, airlines, licenses

Federal payroll taxe s - split evenly between employer and employee

  • social securirt: 12.4%

  • medicare: 2.9%

State Only

  • property taxes (CA) median is 0.71%

  • sales taxes (CA) - range of 7.25% (yolo) to 10.25%


Big Beautiful Bill (2025)

  • main thing: tax cuts made in the past were permanent

    • reduced federal income by trillions of dollars

  • cut from medicaid, student loans, food

  • gave money to the rich (defense, ice, temporary tax cuts)

  • criticism: contribute to the budget deficit, which it did


Key terms:

  • withholding

  • refund-you withheld more than you owe

  • exclusions - not included in gross income

  • deductions-deducted from gross income

  • credits - deducted from tax owe

  • refundable credit - if the credit is more than what you owe, you receive the money


Deductions

  • Standard (given no questioned asked):

    • single or married filing separately - 12,400

    • married filing jointly - 24,800

  • itemized (specific out-of-pocket expenses that you can subtract from your Adjusted Gross Income (AGI) to lower your taxable income, provided your total eligible expenses exceed the flat Standard Deduction for your filing status)

    • mortgage interest on house (house < 750k)

    • charitable contributions

    • medical and dental

    • state and local income, sales, and personal property taxes up to 10k

    • gambling losses

    • $2,500 in student loan interest, income phaseout limits


Investment income vs. wage income

  • long term (1 yr hold) capitas (2021) (taxed more lightly than wages are)

  • Wages — top marginal rate — 37% (2024)

  • Romney vs. Obama

    • romneys - 13%effective rate on 22 mil

    • obamas - 20% effectiive rate on 790,000


Famous 47%

  • dont pay fed income taxes


Is making taxes less visible politically clever or democratically

(knife to a gun fight)


progressive - rich pay higher percent of income (income tax)

regressive - poor pay higher percent income (sale tax)

  • effect poor more than higher income people

    • poor spend all income

    • rich saves some income in saving which do not get taxed


Home mortgage interest deduction

  • deduction of interest on home loans (for homes of less than $1 mil)

  • only benefits people who own homes and give benefits with expensive homes