Hacker News Reader

Comment by wakkaflokka | Hacker News Reader

I didn't understand that our tax brackets in the US are marginal (i.e. we don't pay 35% of our entire income if we are in that bracket), until a quarter way into my PhD program.

It never ceases to amaze me some of the basic stuff in life I still don't know.

Luckily I researched how to pay off my undergraduate student loans in the best manner as soon as it was time to start ponying up.

View on HN

> I didn't understand that our tax brackets in the US are marginal (i.e. we don't pay 35% of our entire income if we are in that bracket), until a quarter way into my PhD program.

Is this common? How do we educate people about this? How can we have a serious conversation on tax reform when people don't know what system we have now? Personally, I want an end to most deductions and credits (but honestly because there are so many that I'm not using and never will use). However, if wager that the only people who know about them are the people who use them.

For example, the Masters exemption for Airbnb hosts makes no sense.

Misunderstanding how marginal taxation works not only seems common in the US, but I suspect it's something that is encouraged, as a way to get poor people to support cuts in taxes on the highest brackets.

It also causes folks in one tax bracket to keep their income down for fear of paying way more. I've had conversations with multiple people who were deadly afraid of earning another dollar because they thought their entire income would be taxed at that rate. They were only disabused of the notion after bringing up the IRS tax tables and calculating it all.

Also the United States tax code is amazingly complex.

Yes and simplifying it involves in pissing off a lot of people. Closing loopholes makes people made. People who have money. People who will spend money to keep things the way they are. And (sometimes) we are those people.

I don't know how we can ever actually simplify the tax code.

I also didn't understand the marginal aspect of tax brackets myself until about the same point as OP. We only ever talk about tax brackets as a percentage, I feel, so that aspect just never comes up. It's an easy assumption to make.

(And even if you feel like that assumption is nonsense, since it results in absurd situations like an income increase resulting in a net loss: I would say most Americans don't expect the laws or tax code their government makes to behave sensibly, so this just isn't a red flag.)

> How can we have a serious conversation on tax reform when people don't know what system we have now?

We have this issue in a number of areas, not just taxes; e.g., tech issues (encryption, net neutrality) in politics.

(And I find this happens a lot, not just in politics. For example, I feel that I've run across a number of people who think that because C++ lacks garbage collection, that C++ code must therefore be littered with manually new/delete calls; thus, GC is "better", because folks don't realize that an alternative, RAII, exists.)

Live in the UK, we get taught that sort of stuff in high school. Every term we'd have one morning for PSHE (personal, social, health and economic education) where we'd learn things like how to fill in taxes, how to create a CV and also some more varied ones like how to play poker.

Although occasionally they were hit and miss (pornography is as bad as cocaine was a memorable one), I really valued them as useful life skills. The Wikipedia article gives an excellent definition [0]:

> Personal, social, health and economic (PSHE) education has in various forms been part of the National Curriculum for schools in UK since 2000 ... PSHE education is defined by the schools inspectorate Ofsted as a planned programme to help children and young people develop fully as individuals and as members of families and social and economic communities. Its goal is to equip young people with the knowledge, understanding, attitudes and practical skills to live healthily, safely, productively and responsibly.

[0] https://en.wikipedia.org/wiki/Personal,_Social_and_Health_Ed...

How old are you? I was never taught anything useful like that in secondary school. I'm 32.

Not the chap you're replying to, but we had that in middle school. I'm 27. I think it was a reasonably new thing here. I don't remember them teaching us much about economics, all I remember is a lot of drug paranoia, and how to make a CV that wasn't awful (which to its credit I felt was worthwhile)

I feel like there would be a relatively short list of high value topics: basic financial knowledge (interest on savings & loans, personal accounting), mortgages, how to choose a job specialization (including objective numbers on salary / hiring in various fields), how to apply for employment, how to find better employment, how to avail yourself of the various government-funded services (library, medical, etc) or interact with their private equivalents, basic legal knowledge.

Summary versions that could easily be knocked out in a single year-long grade school course.

The biggest point of teaching these to everyone would be to address income inequality. Because if you're from an affluent family, these topics are usually information you have ready access to via your parents. If not... you really don't, and that has an impact on your chances of success in life.

Reply on news.ycombinator.com