Lulu: Hello again and welcome back to America under the microscope. Hello James.
James: Hello, Lulu.
Lulu: So what are we going to talk about today?
James: Well, we are going to talk about the topic that many people are find a little bit strange.
Lulu: Is it not something fun?
James: That depends on how you look at it, we are gonna talk about taxes.
Lulu: Taxes, wow, that's a headache in most of the countries.
James: I will not disagree with you on that.
Lulu: And if I know anything about the American tax, I mean from the TV or the movies or the people that I ever talked to, it's really a complex topic, isn't it?
James: Yeah, if you watch a lot of American TV shows, there is always a lot of jokes and stuff about how complicated taxes in America. And those jokes have some base in real life.
Lulu: So, First of all, let's start from the basics, normally, in a country, you have to pay tax when you work, right? So when you get an income, you pay taxes, is that the same in America?
James: Of course, yes, you get an income, you have to pay tax on it.
Lulu: How many basic taxes you have to pay if you live and work in America.
James: Ok, so there are a lots of taxes in America but let's look at the basics. First, we have what's called Federal Income tax which everybody in the country pays if they earn money, then there's state income tax which depending on where you live or work you have to pay the local state tax.
Lulu: Ok, so federal income(联邦政府的个人所得税）and state income, this is the state you're living in（是你所住的州的income tax), you basically pay both at the same time.
James: Yes, you pay both at the same time.
Lulu: And anything else?
James: Well, there will be sales tax which is simple, because it's just you buy something in the store, there is tax you pay it.
Lulu: Yes, but the taxes were already added into the price, right?
James: No, not in the United States.
Lulu: Ok!
James: This is one thing that frustrates many people who visit America, cause if you go to many other countries, the tax is included in the price.
Lulu: Yes, in China, when you see a price that is the price, that's what you pay. But in America it's not the case?
James: No, the price is the price before tax.
Lulu: So in the end, when you actually pay your bill, it will be higher than what you see on the price tags.
James: yes, so if you look at those receipt, you'll see on the receipt there have a sales tax in the percentage and it would be included with the final prices.
Lulu: so let's dig a bit more into it, let's start with federal income tax. How much is it?
James: Federal income tax can be anywhere between zero to about 39, 40%.
Lulu: And this is for everyone who draws an income.
James: Anybody who makes money in America has to pay tax, Federal income tax.
Lulu: what if you are only having minimum wage, let's say if you work a job that only pays you minimum wage.
James: You will still have to pay your income tax on it, however, if in a year you make below the line that requires to be taxed or not taxed, then either you will have to pay the tax or you will get your money back.
Lulu: In China, a lot of the times our tax gets deducted, and then the money we're getting in China is already after tax income a lot of the times, In America, I heard that you have to do your own taxes?
James: yes, we have to do our own taxes, what that means is the day when the taxes are due we have to fill in a lot of paper work basic thing how much money we earned in a year, and other information that might allow us to lower a taxable income to see how much we should owe or how much the government needs to return to us.
Lulu: That sounds really complex, and everybody needs to do that?
James: Unfortunately, yes
Lulu: And when is the tax due, it's once a year, isn't it?
James: April 15th.
Lulu: April 15th, what if you are doing it late, if you cannot hand in in time.
James: well, depending on how much tax you would owe, the common would be a warning the first time, but it's also not unusual to be given a fine.
Lulu: Oh, so you will be fined, but how can people, I still don't understand, that sounds overly complex, how can people who are not good at math do this on their own.
James: on their own, very badly.

Lulu: Ok, then what's the solution?
James: unfortunately, there isn't a good one, most Americans who have money will hire an accountant to help them with taxes, other people they are more likely just have mistakes in the tax forms, and usually will lead to paying more tax than you need to.
Lulu: So, will they get those tax back if they paid more?
James: Probably not if they didn't fill out the form correctly
Lulu: So you need to correct your own mistake, in order to get it back.
James: Yes.
Lulu: That was about the Federal income tax, but what is considered income? Let's see if you work for yourself, if you are contractor.
James: Yeah, you still pay income tax,
Lulu: And what if you invest, let's say, in the stock market.
James: You would have to pay tax on that but it's actual a different tax rate, called gains tax.
Lulu: gains, 投资收入的tax，不是普通的劳动型收入，so Federal income tax, and then what about state income tax you mentioned.
James: Yes, some states have their own income tax which will be charged, on top of the Federal income tax, but not everybody has to pay this.
Lulu: You said some states, so that means other states will not have state income tax?
James: Yes, so my state, I am from Washington State, we have no State income tax.
Lulu: Lucky you, so for those states who have income tax, how much is it?
James: It depends… usually six, seven, eight percent is fairly common.
Lulu: That's on top of Federal income tax, earlier you mentioned sales tax, so when you buy things, when you pay for service, you get sales tax, I know a lot of Chinese would sometimes go to America to shop for things, because apparently the taxes are low there, so that they can get a discount, so is there a set sales tax for the entire America or is it different.
James: No, sales tax is decided by the states, so each state is different, and inside each state, a town can put their own sales tax, so even different cities can have different taxes.
Lulu: Does that mean that when you go to America, if you want to shop there, for a bargain, then you really need to research which city or which state has the lowest sales tax.
James: Yes, if you are going to visit and you plan to go shopping, you should choose the states that have low tax.
Lulu: Do you have any recommendations?
James: Oregon.
Lulu: So, they don't have any tax?
James: Zero sales tax
Lulu: Why is that?
James: I don't have a good answer, it's just the government in the state decided to not to have sales tax.
Lulu: That also would be easy, because then you don't have to have tax refund when you get back. By the way, do they do tax refund in America for tourists.
James: No that I'm aware of
Lulu: Ok, so we talked about Federal income tax, state income tax and sales tax, these are tax that people generally encounter, one more thing, about people who own houses properties, you also have to pay property tax, right?
James: Yes, there is property tax on any property that you own.
Lulu: And do you have to pay for just building or both, the land and building.
James: It's land and building.
Lulu: And it's a set rate?
James: No, it's a percentage of the value of the land, and the value can change yearly depending on, you know all kinds of situations, whether you put a new building on, or things are getting better or worse?
Lulu: So, for example, if you keep improving your house, and if your house goes up in value in the market, then technically you have to pay more property tax
James: Yes,
Lulu: And will the percentage change?
James: It can change, if the government decides to change the law.
Lulu: I see, so in this short episode we have learnt about Federal income tax, state income tax, property tax and sales tax in America, and these are the things, even though they sound complex but these are the things average American need to deal with.
James: Yeah, unfortunately it's part of our daily life.
Lulu: So, in our advanced episode, we will explore more, I know it's complex topic, and hopefully we can give you the basics.
See you next time!

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