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Marginal income tax rates for a single California resident (2007)
- joubert 16y agoI probably made a whole bunch of mistakes here, never mind the major pieces I omitted Harms credibility.
- pragmatic 16y agoI'd be more interested in the new effective tax rate in California or other "high tax" states.
- _delirium 16y agoPart of the problem leading to the flat curve is that while California's rate is technically progressive, it ramps up very fast and is flat past that: all the brackets are below $45k.
- uuilly 16y agoThere are few places on earth with the natural, intellectual and creative abundance of California. It's absolutely inexcusable that we are in this situation.
- crocowhile 16y agoWhat if high taxation somehow contributed to make CA what it is?
- jquery 16y agoI think smart, risk-taking people coming to California for its great climate, beautiful landscapes, and rich natural resources had more to do with it. California had the biggest net exodus of people in 2008 according to the US Census. I doubt that is because of California's great climate, beautiful landscapes, and rich natural resources... I think to the extent high taxes and regulations are responsible for California being what it is, they are no longer serving the people of California's best interests.
- evgen 16y agoThe smart, risk-taking people came to California because that is where all of the other similar people are. The first ones came here because for a while California had some of the best infrastructure and education system in the nation. Bar none. Prep 13 pretty much ended that dream and now we suffer through the consequent boom or bust state finance cycles, a dysfunctional statewide political system that entrenches political extremists, and an equally moronic voter initiative system that ends up causing more and more damage every year. While there was a large net exodus in 2008 (and a similar one in 2000-2001) there were also massive inflows prior to the economic downturns associated with those years.
- kscaldef 16y agoI didn't leave California because of the taxes (I moved to another state with nearly identically high taxes). I left because, despite being in the 95th percentile of income nationally, I couldn't afford to buy a house in a decent neighborhood with decent schools.
- jquery 16y agoWhat reasons can you think of for California being unable to build enough housing to keep prices affordable? Do you think zoning and property restrictions and regulations might be related? As someone who is interested in the California real estate market, I'm wondering what the fundamentals are that keep the prices so much higher than other states. It seems like earning money here and moving into a much larger house elsewhere might be the smarter move.
- _delirium 16y agoCalifornia has amongst the most extensive urban sprawl in the entire country, so it's strange to think of it as a place where zoning and property restrictions restrict supply. LA is world-famous for its urban sprawl and car culture! And in the Bay Area, you can drive from Millbrae to Gilroy while going through nothing but endless suburbs for 65 miles. Meanwhile, Portland has super-restrictive growth and zoning policies, and is much cheaper. So I think there are more factors at work.
- stretchwithme 16y agoI agree. With all the brains, you'd think we wouldn't let the government abuse us so much. perhaps its just the fact that California is so huge and local control over expenditures is really, really gone. Its much easier to use people when they're far away and not your neighbors. Its a lot harder to see exactly how you're being bled dry when there are 18 layers of obfuscation.
- jacoblyles 16y agoIt suffers from the same issues that the federal government does: democracy doesn't scale. The larger the task of governing, the harder it is, the more room for graft and waste, rent-seeking and inefficiency. The US is the largest economy in the world and last I checked California is the 5th. Places like Sweden have higher taxes, but they also have a much more manageable task of governance and more efficient public sectors. You put some tax money into the Swedish government and you might get some valuable services out of it. You give some to Uncle Sam or Uncle Arnold, and it is disappearing in some corporate/union/special interest pocket through some thousand-page bill.
- stretchwithme 16y agoexactly. the smaller the country, the better run it seems. I like Switzerland's model. its impossible for someone to siphon off resources when the democracy consists of 10 people and almost certain to happen when there's 50 million. Of course, the naysayers will tell you that complex societies are tough to manage and require more government, but that's bunk. It should require less government, as there is far less border per person to defend.
- ars 16y agoOn the behalf of the other places on earth: "I object!"
- wisty 16y agoI'd be interested to see what income minus tax looks like. It looks like there would be "income traps", where earning a higher base salary would actually leave you less well off. Good to see the USA rewarding hard workers!
- _delirium 16y agoThere are only income traps if the marginal rate's >100% at any point, which it isn't here. Since the marginal rate's never above 44%, it means there's never a case when earning an extra $1 won't gain you at least an extra $0.56 in your pocket.
- mattmaroon 16y agoA lot of people don't understand what marginal tax rate means and how taxes work in that regards. I'm guessing the parent was confusing it for average tax rate.
- wisty 16y agoYep. I was.
- emmett 16y agoThe numbers cited in the post (as he points out) do not take into account all the antipoverty programs we have. When you take those into account you get a graph like this: http://4.bp.blogspot.com/_djgssszshgM/SvtscpywvOI/AAAAAAAABDg/dBO8WC5e4wU/s1600-h/implicit+tax+rates+2.png http://4.bp.blogspot.com/_djgssszshgM/SvtscpywvOI/AAAAAAAABD... There actually is a dead zone. Which is horrible.
- _delirium 16y agoPart of the difference is also that he's looking at single people, while your linked graph is for a family of three, and there are much more generous grants/transfers for families. There has been some effort to get rid of dead zones by changing thresholds into phase-out zones, but not everything's been changed, and some programs probably need more gradual phase-outs, especially if you consider their impact when taken together. There's an issue though that gradual phase-outs are hard to structure in a way that's politically popular: most people seem to have a mental phase-out that's fairly steep, so it's popular to give food stamps to a family of 4 making, say, $18k, but unpopular to give food stamps to a family of 4 making, say, $30k. But if you phase them out from 100% to 0% within a $12k range, you produce a significant implied tax over that range. Either the phase-out has to start so low that genuinely poor people get <100%, or it has to go up high enough that people who no longer really qualify as poor get some low but non-zero amount.
- Scott_MacGregor 16y agoCalifornia taxes and business red tape are why we chose Austin over Silicon Valley. Texas just seems a lot more business freindly in many ways.
- rdl 16y agoI am definitely looking at Austin and Seattle, and partially-in-Nevada, as options to California.
- petercooper 16y agoHere's a similar graph for the UK (but by total tax paid rather than marginal): http://upload.wikimedia.org/wikipedia/commons/2/23/UK_tax_NIC_percentages.svg http://upload.wikimedia.org/wikipedia/commons/2/23/UK_tax_NI... (or if your browser won't do SVG, this is almost the same: http://www.reviewmylife.co.uk/data/2008/0901/percentage-of-income-as-tax-08-09.gif http://www.reviewmylife.co.uk/data/2008/0901/percentage-of-i...) It's funny that the UK - being European - has a reputation for high taxes and "socialism." There's a lot I don't like about the UK but the taxes are mostly fair (it's the rules for ancillary tax issues that are messed up). The taxes there even include emergency medical expenses. Mr. Californian earning $50k would be at ~42% on the main post's graph. Mr. Brit earning £34k (roughly equivalent) would be ~26% on the UK graph (or even less if he were self employed!). Hmm.. perhaps sky high gas taxes and 17.5% VAT are a little more bearable for me now.. :-) [Note: I ballsed up in that last paragraph. The CA chart was marginal, not total like the UK graph. The UK marginal rate at £34k would be 20% for income tax (http://www.hmrc.gov.uk/rates/it.htm http://www.hmrc.gov.uk/rates/it.htm), 11% for NICs. So 31% vs 42%. However, at £35k the marginal rate would be 40% + 11% NIC == 51%. At £40k, however, the marginal rate would be 40% + 1% NIC == 41%. Who said this was easy??]
- eggoa 16y agoThe Californian would be taxed 42% of his 50,000th dollar. Overall I believe he's paying less than 26% of his entire income.
- petercooper 16y agoDoh, good call. I fell into the marginal vs total trap I tried to cover in my first paragraph, lol. I'll add a note.
- gcv 16y agoThat's an interesting comparison, thanks for posting it. I'd love to see something similar for some other countries famous for high taxes and high social services, e.g., Sweden.
- dschobel 16y ago
- philwelch 16y agoThought experiment for the economically minded: Labor has a backwards-bending supply curve. Do heavily progressive tax rates flatten out the backwards bend? (If this comment makes absolutely no sense to you, see http://en.wikipedia.org/wiki/Backward_bending_supply_curve_of_labour http://en.wikipedia.org/wiki/Backward_bending_supply_curve_o... and http://en.wikipedia.org/wiki/Supply_and_demand http://en.wikipedia.org/wiki/Supply_and_demand for context).
- rmorrison 16y agoIt's even worse than this if you're self employed, because you have to pay an additional 6.2% for the employer's portion of social security. Ouch. Edit: I just moved to CA in 2009, and am now working full time for my own bootstrapped startup. I also happened to get married in 2009, which is an additional tax burden. The taxes are painful. All in all, I feel like there is certainly a negative incentive to work for oneself, especially while bootstrapping and struggling to pull in enough money to pay the bills. We're motivated and are really enjoying it, but I would much rather see tax incentives for founding startups.
- uuilly 16y agoDon't forget the 10% sales tax.
- CWuestefeld 16y agoThis is the thing that galls me the most, believe it or not. My employer typically makes less than 10% margin on the products it sells. That means that for all the work that we do, the state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it? Now add on top of that the corporate income tax and other ways they're bled. With all this in perspective, it's really hard to see why anyone would want to start a business.
- gnaritas 16y ago> he state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it? Seriously? Without a stable government enforcing property rights and the rule of law you wouldn't be able to conduct business reliably. Government provides the field business is played on, they have every right to a cut to pay for providing that field. Peace isn't free.
- jquery 16y agoDoes peace and a fair playing field require 30-40% of every productive person's income, or is that the result of special interests crowding out the core functions of government?
- megablast 16y agoI guess this is why only rich people care about tax changes, because the rules are so complex, poor people don't have the time to study them. Rich people don't have the time to study them either, but the differences can be so great, it is worth it for them to hire an expert.
- stretchwithme 16y agoridiculously high. but at least those who work 80 hours a week aren't taxed more per hour than those who work 40. I guess there's some justice in the world. you'd be surprised at the number of people who think just because you work more, you should pay more. as if one exists for the convenience of others
- jrp 16y agoWhat do you mean about the 80 vs 40 hrs/wk? That working more will (naturally) get you more money, so you pay more taxes? Or some kind of "hard-worker" tax where they tax you based directly on effort? I haven't heard any of these proposals.
- stretchwithme 16y agoI was referring to the fact that worker A at Burger King making $5/hour for 40 hours shouldn't have to pay a higher tax rate on the extra hours than on the first 20. Its simply crazy unfair that if spend the second 20 hours watching tv, you pay less for your government services AND you pay less per hour. Personally, I'd prefer if we all paid for the government we used, rather than dumping the costs off on people who are more productive or lucky. We really do not have the right to other people's property, not matter how much they make. If we want something we haven't earned, we should try an ancient non-violent method of obtaining something. Its called "asking".
- dbaron 16y agoInteresting to see this on HN a little over 2 years after I wrote it. My main point wasn't so much about the magnitude of the taxes, but about the shape of the graph. Most of what gives this graph its bizarre shape is a result of the federal laws, not state ones; I just happened to be computing for a California resident because that's where I live, so I had the tax forms in front of me. (And it's also the largest state by population.) (I'd also note that state-to-state comparisons of taxes aren't really fair without adding local taxes too, since different states have different relationships between the amount of money spent by the state government and local governments. In California, specifically, it's very hard to raise local (property) taxes, so much of education funding comes from the state government. In many states, education would be funded much more by local taxes.)
- jacoblyles 16y agoPolicy is getting more and more irrational over time. It's hard to discern any rational or ideological motivation behind much of it nowadays. It'll probably get worse before it gets better.