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Season 5

It’s the Season 5 finale of Pink Money! In this episode, Jerry breaks down one of the most misunderstood topics in personal finance: how taxes actually work. From U.S. progressive brackets to global flat tax systems, Jerry explains why your last dollar doesn’t put your whole paycheck in a new bracket, why deductions matter, and why “simple” tax systems aren’t always fair.

Along the way, he highlights how states like Texas balance no income tax with high property and sales taxes, why federal cuts often circle back to you through state taxes, and why understanding the system helps you avoid voting against your own best interests. Whether you’re a W-2 employee, a self-employed gig worker, or just curious about how taxes hit your wallet, this episode will give you the tools to think critically, plan smartly, and head into tax season prepared.

And with this, Season 5 wraps up—get ready for new insights, stories, and surprises in Season 6 of Pink Money!

đź’¬ Have a question or comment? Contact Jerry here


Transcript
WEBVTT

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The following podcast is for entertainment and educational purposes only.

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Remember to seek competent tax, legal, and investment advice that is unique to your personal situation.

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Hey, welcome to the Pink Money Podcast, and I'm your host, Jerry Williams.

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We talk about all things related to money from a queer perspective.

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And today I wanted to talk about taxes, really.

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So it kind of stuck in my mind a few things when I was reviewing the 2024 tax charts, and it just reminded me that we're in a progressive tax system.

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And that just means that your very last dollar of your income could put you in a totally different tax bracket.

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It doesn't mean that your total income is taxed in that bracket.

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It just means that it's progressively broken up into these brackets and then taxed accordingly.

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So that's also true for other countries as well.

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Many countries have progressive tax systems like Canada, Germany, the UK, but some places also have a flat tax, and that just means everybody pays taxes at the same rate.

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One of the highest in the world, I believe, is uh Ivory Coast, where their tax rate is something really high, like 60%.

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But there's other countries as well that have a very high tax rate as well, you know, like the Netherlands, et cetera.

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But a lot of people don't like a flat tax system because they really think that it's unfair.

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Because if we're all paying taxes at the same amount, meaning what let's say you're only only earning 30,000, someone's earning 300,000, but we're all paying taxes at the same rate.

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So obviously you're paying a greater burden on you at that tax versus someone who's paying much smaller amount at that much higher income.

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So, but a lot of places they find that a flat tax system is just simple and easy.

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And it's true, but again, is that really the fairest way?

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I don't know.

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I guess that's up to debate for another day in time.

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But the deductions, let's say, even if you're in the 37% tax bracket, will typically reduce your total income down so that you probably aren't going to be paying taxes in the 37% tax rate anyway.

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I think most people, even those, like I said, that fall in the 37% ultimately pay something like 21 to 24% of you know that's their actual tax rate that they fall into ultimately.

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But uh some people, you know, itemize, some people don't, some people just take the standard deduction, etc.

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It's just one of those things.

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But you know, I'll one thing that I find is curious is that people in the highest tax brackets actually pay 60% of the total taxes paid.

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So I again debatable however you want to see it, but you know, there's also states like Colorado and they have a flat tax, and there's other states like Texas, and they don't have a state tax.

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But whether it's a flat tax or sales tax or a property tax, somewhere, somehow, the government is gonna get their money from the citizens.

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They're gonna get it from you, right?

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But what you really have to consider as well when you're thinking about taxes is how much am I actually paying?

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And that's not always as clear-cut as that may seem because again, there's different ways that you can actually pay your taxes.

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Like you go to the grocery store, right?

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And then you pay taxes on your groceries.

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That's the sales tax.

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And in Texas, it can go as high as 8.25% in total taxes.

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But property taxes in Texas are also very high because, again, they have to offset the fact that there is no state tax.

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So even so, you know, many people they clamor for the federal government to get out certain industries, let's say education.

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You know, there's a whole push to dismantle federal departments like education, energy, and uh others.

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But, you know, if all these departments, you know, seemingly go away, it doesn't mean that somehow, some way that this the assistance that they provide, you know, doesn't completely go away.

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It just means it goes, it's pushed back to the states and ultimately it's pushed back to you.

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So the more that disappears at the federal level level, well, you know, if it goes back to the state level, then ultimately it's gonna go back to you.

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So those are one of the pitfalls you have to really think about when people really are talking about, hey, let's get rid of this.

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Let's have a much smaller federal government, and you know, this is a better way to go.

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States can do much better job, blah, blah, blah, blah, blah, blah, blah, blah.

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So I don't want to debate that.

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I'm just saying if those things go away, they don't completely go away, they really circle back and go to you.

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So, well, that means again, you're just gonna be paying higher taxes.

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In other states, let's say, you know, Arkansas, Kansas, Nebraska, Iowa, you know, those states are experiencing some problems, meaning their citizens are farmers, you know, they actually receive a large chunk of assistance from the federal government.

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And that helps them to continue to, you know, provide food for the U.S.

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and actually a lot of places all around the world.

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And when that goes away, then the farmers go away.

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So unless the state steps in or the government steps in to help these farmers, they'll just simply go bankrupt and they won't be able to provide food any longer, something that they've done for generations.

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So there's a real danger there.

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So bringing it all back together, I'm just saying that you have to pay your fair share of taxes, right?

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Okay.

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You can pay it all at once, or you can pay it systematically throughout the year.

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You know, if you're a W-2 person, then of course, you know, your employer takes it automatically out of your check and you don't really see it, and you don't really worry about your taxes until, you know, the April 15th deadline.

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But, you know, that's when you hopefully get a refund and you don't owe anything.

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But if let's say you're a self-employed person, you know, uh 1099, you know, nobody's gonna be doing any withholding for you, and you have to do it yourself.

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And even let's say if you're a food delivery person, you drive for Uber or you know, whatever kind of 1099 gig you got on, if you're self-employed, then you have to pay quarterly taxes.

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So that's just how the government sets it up so you're not faced with a huge tax bill on April the 15th or whatever your tax filing deadline is.

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So you just want to make sure that again, you don't get into a bind when you have to pay these taxes all at once.

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So you want to pay your fair share when you have to pay it, etc.

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But again, it doesn't mean that taxes that you pay at the end of the year are all the taxes that you pay, right?

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I mean, I think everybody knows that, but it doesn't mean anybody's really gonna get away totally, you know, scot-free from paying taxes.

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So even let's say if you're a renter and you don't own any property, but whomever owns that apartment building or the land that it sits on, you know, they pay property taxes.

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And what they're gonna do is pass those costs back on to you, and it's gonna be passed on to the renters, so they actually pay your his property taxes for him.

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It's just baked into your monthly rent.

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So you don't get any tax deduction, right?

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But he gets one, right?

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Because that's just how the tax system works.

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Fair or not, it's just how it goes.

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But you know, uh what I think that we want to really reconsider when we're talking about, you know, should these various federal agencies be dismantled and pushed back to the states?

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I mean, is that kind of cutting your nose off to you know spite your face?

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Because, you know, when you think about it in a holistic sense, and when you want to really push for a smaller government, you know, again, this ultimately comes back to you and ultimately is going to mean higher taxes.

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And that's one of the missing key components.

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I don't think that's very easily understood by the general public, nor is I think it very explained well uh by any politician, you know, because they may not even understand it themselves and they may not have even thought through it from A to Z either.

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And they're not very likely to step in front of you and say, hey, by the way, we're gonna get rid of this department and all those costs are just gonna go back to you, right?

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No, of course not.

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They're not gonna say anything like that.

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They're gonna say, hey, we did this, we got rid of this, that just means a smaller government, so hooray for us, right?

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And they'll leave it at that.

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And then when it comes back to you, you're like, maybe we shouldn't have done that, right?

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But it's too late, it's already been done.

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So we don't want to put ourselves in that situation unless we truly are accepting the facts and we understand the full ramifications of what we're really asking for.

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It could be a case of again, be careful what you asked for because you just might get it.

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And you don't want to end up on the street yourself, you know, because of some of the decisions that were made that you didn't fully understand, and you were essentially voting against your own best interests.

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And we've certainly seen that happen many, many times, especially fairly recently.

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But again, another topic for another day.

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But not to be an alarmist, but I think that it's it behooves us to really understand how these things work, and that can help you make the best decisions for yourself, and then you can push for those who represent you to make the best decisions, not only for you, of course, but your community, your state, your nation.

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You know, you really want to be knowledgeable about how, again, these things work and how they're ultimately going to affect you.

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And the best that you can do is use your critical thinking skills and ask questions so that you're not blindsided and you feel that you really have a full grasp of everything that's going on.

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Period.

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And even if you don't understand everything, then do a little bit of homework, right?

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Go to other people who seemingly have a better idea of what's happening, maybe read some stuff.

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You know, get as much information as you can.

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That's all I'm saying, right?

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I'm just saying that the more educated we are, the more knowledgeable we are, the better off we're gonna be.

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And that's just you can just say that for practically everything.

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So that's really my spiel for today.

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I don't want to go on and on about it.

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I think you got the whole point here.

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But as we approach the end of the year, it is a good idea to start thinking ahead about, you know, your uh taxes that are gonna be due, especially again if you're self-employed, reducing your tax bill, you know, contributing to your IRAs, all those kind of things, doing some tax harvesting.

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Work with your investment advisor, work with your tax advisor, etc., to be fully prepared and put yourself in the best situation.

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So you pay what you owe, you don't pay more than what you should owe, right?

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You don't want to do that.

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It's not fair.

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So one last thing I'm gonna leave with is this is the finale for season five, which is pretty cool for me.

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I'm glad about that.

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We've got five years under the belt.

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But heading into season six, I've got a few things that are on the horizon, a few things that I think you'll find helpful, useful, entertaining.

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And some of them are already out there.

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And you can go to the website www.pinkmoney.com, pinkmoneypodcast.com, pardon me.

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I should know my own website.

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Anyway, so go to the website, take a look at some of these things.

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I hope that you'll find again them useful and entertaining.

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But I think that's pretty much for me today.

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And other than that, I hope you have a great day and I will talk to you next time.