In settings why does it say capacity 28gb instead of 32gb

Hope someone can explain as in iPhone it says capacity 16gb!

I happened to be browsing the internet tubes, and stumbled upon this thread. I'm afraid your answers aren't exactly accurate.
This "missing space" is not being taken up by the OS or whatever. iOS is what accounts for part of that orange "other" space and it is actually contributing to your used space. That "missing" 2GB is a simple explanation of math and measurements. The problem is that there are two different measurement standards for Gigabytes: decimal and binary. Decimal measures a GB as a literal billion bytes (1,000,000,000). That is what is in your iPhone. (16GB=16,000,000,000/32BG=32,000,000,000).
Now, binary doesn't measure it that way. Binary measures in 1024 (1KB=1024bytes/1MB=1024KB/1GB=1024MB). It should be noted that both standards recognize there are 8 bits per byte. While your iPhone does include 16GB, it's being judged by the decimal standard. However, your iPhone's software measures by the binary standard. Do the math, starting with 16,000,000,000 bytes, and you divide by 1024 three times, you get your binary standard: 14.9GB. The 32,000,000,000 breaks down to 29.8GB.
That being said, you can actually "lose" an insignificant portion of that space to metadata.
It's all a bunch of marketing strategy, to be honest. It's just easier to say 16GB/32GB than to say the tedious number that it breaks down to in binary. Just like when you're buying internet service. They don't measure it in MB(megabytes)/second download speeds, because it looks too slow and the scale is too large. That's why they sell you your Mb(megabit)/second speed. When you think your 15mbps internet is SOOO fast, you're really only getting a peak of 1.875MBps. Make sense? I hope your mind can finally be at east that your phone is working just fine. Lol

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