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Income tax is based on earned income (and income from interest bearing accounts and stock dividends and sales, etc....). If you are paid for sick leave then that is earned income and you are taxed on it. The United States tax code is so complicated that I purchase a $$ program to calculate my taxes or pay a professional tax preparer $$$$ to do the same.
The big reason why taxes are so insanely hard here is special interests having laws passed to give their industries tax benefits. Generally, we can deduct from our income mortgage interest paid, state income tax (yes, most states in the US have their own form of income tax), real estate property tax (tax you pay on your home), personal property tax (tax you pay on cars, boats, etc...) and certain expenses above fairly high thresholds. You also get deductions for your minor (under 21ish) children living at home.
I'd rather see a flat tax or a national sales tax. Our current system is ridiculous.
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