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0 pointsimajoredinecon1y ago0 comments

Counterpoint: I’m in the US and my effective income tax rate is in the mid-40s, with my marginal rate over 50%. And I’m not in one of the few states with the highest state income taxes.

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jmalicki1y ago

The highest federal bracket is 37%, the highest state bracket in the US is California at 13.3%, Medicare at 2.9% if you're self employed, NIIT caps out at 3.8% - so even earning well into seven plus figures, with punitive NIIT, only puts you at a max of 47% marginal. Social security taxes stop long before the brackets kick in.

NYC has combined local and state top marginal rates of 14.776%, to go up to 48.476%.

I call BS on marginal rates exceeding 50%

Edit: even the new 2024 California payroll tax cap lift and mental health tax on seven figure incomes put it at 49.1%. Marginal rates that high don't exist in the US. Even then that requires paying payroll taxes and NIIT on the same income, which I'm pretty sure is impossible.

imajoredineconOP1y ago

Thanks for the correction- I did some math and my marginal rate is something like 46%, which, while it’s indeed not over 50%, still is pretty discouraging when weighing whether it’s worth putting in enough effort to get another raise.

callmeal1y ago

A quick back of the envelope calculation shows that an income of $1 million gets you an effective tax rate in the mid 40s in California.

AGI: $1000k Federal Income Tax: $322k California State Income Tax: $102k FICA Taxes: $32k Total tax: $456k

Compared to say Germany, where for the same income you would be paying over 50% in taxes. So I think you're doing very well.

bad_haircut721y ago

Admittedly I live in Texas (no state income tax) but where do you pay 40%? California?

screye1y ago

25(federal)+8(social security)+5(state) is a common combination. That's 38%.

God forbid you live in NYC and it can gonna to 42%

Jtsummers1y ago

A single W-2 earner making $1 million has a 33.49% effective federal tax rate (OASDI, Medicare, Income) taking only the standard deductible and doing nothing else to lower their taxable income (no tax advantaged accounts, not spending enough in categories that allow itemization, etc.). A single non-W-2 earner (has to pay the employer part of payroll taxes) has an effective rate of 34.84%.

If they're married the rates are 29.62% (W-2) and 30.97% (non-W-2), under the same assumption that they do not do anything to qualify for either reduced taxable income or any kind of rebate or credit.

Most people don't make $1 million, and those that do have ways to reduce their tax burden quite a bit without much trouble.

EDIT: Small modifications to the numbers above, they were off by about 0.4% to 0.5%.

callmeal1y ago

Social security is 6.2% and is capped (you only pay social security taxes on a max income of $168,600). So if your income is 168,600 you pay $10,453 in social security taxes.

And if your income is $1,000,000 you still only pay $10,453 in social security tax.

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jmalicki1y ago

NYC has combined local and state top marginal rates of 14.776%, to go up to 48.476%.

I call BS on marginal rates exceeding 50%

imajoredineconOP1y ago

callmeal1y ago

A quick back of the envelope calculation shows that an income of $1 million gets you an effective tax rate in the mid 40s in California.

AGI: $1000k Federal Income Tax: $322k California State Income Tax: $102k FICA Taxes: $32k Total tax: $456k

Compared to say Germany, where for the same income you would be paying over 50% in taxes. So I think you're doing very well.

bad_haircut721y ago

Admittedly I live in Texas (no state income tax) but where do you pay 40%? California?

screye1y ago

25(federal)+8(social security)+5(state) is a common combination. That's 38%.

God forbid you live in NYC and it can gonna to 42%

Jtsummers1y ago

Most people don't make $1 million, and those that do have ways to reduce their tax burden quite a bit without much trouble.

EDIT: Small modifications to the numbers above, they were off by about 0.4% to 0.5%.

callmeal1y ago

Social security is 6.2% and is capped (you only pay social security taxes on a max income of $168,600). So if your income is 168,600 you pay $10,453 in social security taxes.

And if your income is $1,000,000 you still only pay $10,453 in social security tax.

1 more reply

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