taxes, an explanation Show more
In the US, we have graduated tax brackets: for your income IN EACH BRACKET, you pay a certain amount in taxes. It's important to make that distinction, because you don't pay the top tax rate on your full income - just on the income that falls in that bracket.
An example: let's say the bottom two brackets are:
* $1-20,000: 20%
* $20,001-40,000: 25%
And let's say you make $20,000 a year. You fall into the first bracket and pay 20% ($4000) in taxes.