My adventure into the Mathematics of Taxation

I have been filing my own taxes since I was 15. Although I now see that math plays a huge role in what money the government takes, at 15 I just snapped a picture of my W-2 to Turbo Tax,  let it do its thing, and boom! I had a check in the mail.

I yearn for the days when it was that simple.

Being a single, independent adult with multiple 1099’s, w2’s AND college tax credits have made my tax seasons a little less enjoyable. After hearing in class exactly how taxes are calculated, it got me thinking. How does tax math actually affect me? More importantly, how do tax changes affect this math?

What I have found is that taxes are complicated. Many Americans don’t understand how they work, why they are the way they are, or where their money is even going.

In 2017, the Tax Cuts and Jobs Act was passed in an attempt to simplify the federal tax system. The new act includes two major changes:

The first change is the tax rates for the 7 tax brackets. They have been changed from 10% 15% 25% 28% 33% 35% & 39.6% to  10%, 12%, 22%, 24%, 32%, 35% and 37%. 

The second change affects the standard deductions for filers. The standard deductions this year is nearly double what it was last year. For singles, it jumped from $6,350 to $12,000. For Married joint file couples the number increased from $12,700 to $24,000

So, in order to understand how this change affects me and the math of taxes, I actually have to do some math. Since I live and work in New Hampshire, I don’t dont have to worry about anything with the state.  What I DO have to worry about is this difference between the old tax brackets and the new “simple” tax system.

Spoiler Alert: it is not simple.

Luckily, NerdWallet breaks down the math in a way that’s easier to understand:  Being “in” a tax bracket doesn’t mean you pay that federal income tax rate on everything you make. The progressive tax system means that people with higher taxable incomes are subject to higher tax federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates. The government decides how much tax you owe by dividing your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income.” 

Looking at the new tax numbers, we can tell the new standard deduction is obviously going to make a difference. So, if I made the average income of a high school graduate, $35,256,  last year and the same this year,  do I owe less this year because of this new system?

Lets do the math.

I first have to break my income out into the tax brackets. This visual provided by Nerdwallet shows the brackets for someone making $32,000.

Drawings provided by nerdwallet

 

 

 

 

 

 

So with that understood, lets do the math to see how this all makes a difference:

Math done with Standard Deduction

 

Obviously, with the standard deduction, there is a huge difference. With the standard deduction increase, the average high school grad saved $1,239.   But what if no one had any deductions? Do those tax bracket number changes make any difference on their own? I did the math to find out:

Math done without Standard Deduction

So, the tax bracket changes alone saved our average high school grad $781.93.

So what? Well, according to nerdwallet the income range for these brackets is supposed to increase again in 2020, leaving a few more bucks in your pocket. So take the time, do the math, and see if you’re paying too much in at work!

Note: I have no clue why the images are so blurry, they’re all high-quality images, sorry!

 

 

Interesting Facts Before Filing Your Taxes!

Tis the season of taxes, a blessing for those fortunate enough to get a return, while others are cursed to owe money to Uncle Sam. Taxes are an interesting topic, while no one likes to hand over their hard-earned cash, there is an unspoken code within our society that understands the importance of funding local and national government services such as roads, fire departments or law enforcement. Tax reform and how the local/federal government spends our money is a highly debatable topic. Should we increase the taxes to pay off the national deficit or lower the taxes to encourage spending and create a stronger economy? I found an article that has some interesting facts about the United States tax code and will give you a better understanding of the tax regulations.

One interesting fact I found was currently the highest tax bracket is at 39.6%, however in 1944 the highest bracket was at 94%. More so the United States is the only country that requires their citizens to pay taxes on income while working and living outside the U.S. Borders. While the government has their hands in your pocket at least 7 states; Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have no income tax. New Hampshire and Tennessee tax only dividends and interest income. Another interesting fact is it pays to rat! The IRS will pay 30% of any taxes, penalties or interest to any whistleblower.

This article deepened my understanding of the history of the tax code and how it was formed to what we have today. I thought 39.6% was extremely high, but I didn’t know President Franklin D. Roosevelt wanted to increase the income tax to 100% after Pearl Harbor. Even though tax regulation can be annoying or even complicated that sometimes requires a professional to file yours, it is nonetheless important to ensure your due diligence and pay your taxes on time!

https://blog.cheapism.com/fun-tax-facts/#image=1

Test Blog Post

Hi everybody!

As you might guess, math was never really my cup of tea in high school, although I took calculus (and hated it). Hopefully this class can somewhat turn around my distaste for the subject.

Blog Test

Math wasn’t ever my favorite subject in high school. Although I got the concepts, math wasn’t that interesting to me.

What I am Excited about in Math

Hi everyone! When I think about math I usually become somewhat excited, although I do not allways love the tedious aspects of the subject. I do however, love the problem solving and critical thinking side of math. For example, Physics class uses math to solve real world problems. That’s very exciting and interesting.

A little bit about me is that I am a filmmaker. Movies excite me with wonder and transport me to other worlds. I would love to integrate real mathematics and science into the films that I create to give the worlds I manifest in my stories more depth and solidly. Also, I want to do this becuase it would be pretty cool.

 

Robbie Skaff

Post #1

Not to brag or anything but, math was never my strongest subject. However, I have been told by fellow students that this class will help me demolish my extreme fear of math. will I conquer my fear of math or will math conquer me?!

Stay tuned to find out!

First Blog Post

Hello everyone!

I really enjoy math and have to use math everyday while at work! Although I have already completed all of my math courses for my major, I am taking this class because I need a math elective for graduate school. I haven’t taken a math class in over 3 years so I hope it is easy for me to transition into this class!

1st Post (MATH 444)

Hey everyone! Hope you all are enjoying this Saturday. I’ve never been very good at math, but I did do well in a probability and statistics class recently, so maybe that’s changed.