A cool guide to total tax burden by state
A cool guide to total tax burden by state
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I was trying to find the equivalent stats for my country. So far I have failed to do so, but I did find this page. And holy shit I didn't realise it was so rare to have a 0 marginal income tax bracket. America being shitty is little surprise to me, but Canada, Spain, and Germany wow. And the UK and Sweden with their lowest marginal rate being as high as Australia's median income's marginal rate. That seems grossly unfair to the poorest people in the country.
Edit: I did later find this which at first seemed to be pretty much the thing I was initially looking for, but on closer inspection…the UK's effective average tax rate is way less than half of their lowest marginal income tax, so it's obviously not doing what it seems to be doing from the title.
I can't say for other countries, but Canada uses a non-refundable tax credit called the basic personal amount. As long as you make less than that, and file your taxes correctly (and maybe even if you don't), you will pay no income tax. Each province has a similar thing at a similar amount.
So yes, there is a marginal tax rate at even $1, but no one is paying until about $15k.
Interesting. How does that interact with your take-home paycheque? In Australia your income tax is deducted by your employer, so if your only interaction with the tax system is "do job. make money. pay tax on that money", come tax time you should get 0 tax bill and 0 refund, it already having been paid as you go.
If it's a tax credit outside the income tax system, I imagine that would be taken into account after the fact? So you end up getting a big refund every year. Which is nice, but surely would be nicer to have had the money all year? Or do employers' payroll systems take that into account basically like it's part of income tax?
As a general rule, it will be calculated as part of your tax withholding. If, based on the portion of your annual pay for the year covered by that paycheque, you would be under the limit, no income tax would be withheld. There are a number of modifications to help ensure you've had the expected taxes withheld by the end of the year, and they usually work out well. If your paycheques vary wildly, you may see some tax withheld on one and not the other, but if you're consistently not earning enough to put you at a point where you'd be paying taxes for the year, you won't see any deductions and won't have to wait for your tax return to have those withholdings returned.
That said, there are a number of tax credits that apply for low income earners, so you will probably see a tax return even if taxes weren't withheld. Also, there are other deductions that will happen regardless of your income.