The daily monitor leader., 1945-11-02
Taxes


l945 becomes II percent in
1946. There is a 3 percent cut
no matter how high the surtax.
Before you apply your surtax
to taxable 1945 income you de-
duct $500 each for yourself and
each dependent. These $500 de-
ductions are exemptions.
But In 1945, before applying
your normal tax to taxable in
come, you can deduct only one
$500 exemption. You can't de-
duct any exemption for depend
ents.
It's different in 1946. You not
only get a $500 surtax exemp-
ton for yourself and each de-
pendent but you get the same
total exemption before applying
your normal tax.
HOW IT'S DONE
Take an example. John Jones,
married, one child, has an in
come of $2,4O0 in 1945 and will
have the same in 1946. See
what happens to him in l94o
when he figures his tax.
From total income Of 81, 400,
deduct 10 percent ($240) for al
lowable expenses. That leaves
him q net income of 81, 2,16O.
From that he deducts 81 800 -
q $500 exemption each for him.
self, wife and child - and gets
a surtax net income of $500.
He applies the 20 per cent
surtax (it's 20 per cent because
his taxable income is under ST.
OOO) and finds his surtax is
Sl32. Now he turns to his nor
NAL tax.
From that net income of ST.
100 he deducts only a $500 ex-
emption for himself, but no ex-
emption for his wife and child.
This leaves him a normal tax
net income of 81, $3.50.
To that $1,660 he applies the
normal 3 per cent tax and -
his normal tax is $49.80. He
adds the normal tax, $49.80, to
the surtax, 1892, and finds his
total tax is $18l.80. That's his
l945 tax.
See how it works in 1946.
Jones makes the same 10 per
cent deduction for allowable ex-
penses from his gross income OF
2,4OO leaving a net income OF
$2,160, and takes the same
$1,000 surtax exemptions for
himself, wife and child and gets
a surtax net income Of $3.50.
AND SO ON
In 1946 his surtax was 20 per
cent. It's II per cent in l946. He
applies the II per cent to the
$3.50 (surtax net income) and
gets a surtax of $112.2O. Now he
figures his normal tax.
He takes his net income OF
$2,160- which is his $2,40U
gross income less 10 per cent in
allowable expenses-and de-
ducts from it the same amount
of exemptions, $l,500, he de-
Quoted from his surtax net in
come. (In 1945, remember, he
would have been able to de-
duct only a $500 exemption for
himself.) Thus he gets nor
NAL tax net income of $3.50. To
that he applies the normal 3 per
cent tax.
This gives him a normal tax
Of $3.50. He adds this to his
surtax, $112.2O, and gets his
total tax, 1882. But he's not fin
ished yet
From this total tax of $132 he
deducts per cent (S6.60). This
is q step he didn't take and
wasn't allowed in 1945. He de-
ducts then the $500 from the
1892 and gets $125.40. That's the
tax he has to pay in 1946.
Thus his 1946 tax is $56.40
less than in 1945. He finds this
by subtracting his 1946 tax,
$l25.40, from his 1945 tax,
$181.80.
The example used here a
man making $2,40O and having
two dependents-was given just
to show how the tax works. In
case Of most wage-earners the
boss would make the deductions
by table and the figures would
be in round numbers, slightly
different from those here.
Using the table, Jones would
pay Sl84 in 1945 and $3.50 in
1OAR