4 ms·

The federal income tax isn't the only income tax. There are also state, local, FICA, and medicare taxes. Add those in and someone with a $100K salary ends up in

The federal income tax isn't the only income tax. There are also state, local, FICA, and medicare taxes. Add those in and someone with a $100K salary ends up in that 30-40% range.

mikeyouse 9y ago
Yep, if you file as a single person making $100k with the standard deduction, you'd pay right around 32% in total tax between State, Federal, and FICA. If you're a married couple making the same amount, you'd pay roughly 29%.
- jogjayr 9y ago
  FICA contributions top out at $127k gross income. Someone earning $300k/year is paying the same amount in FICA as someone earning $127k. Which I actually think is unfair, but that's another topic entirely. The standard deduction isn't the only deduction available. If you're filing as a married couple and maxing out your 401k and/or IRA you're suddenly saving money and gasp down a couple of tax brackets. A married couple making $100k jointly, and both working jobs with benefits, could put away $36k/year in 401k money alone, which is more than enough for a comfortable retirement after 30 years (and I didn't even take into account any potential employer matching). A couple with one earner can save 23.5k (18k + 5.5k traditional IRA). If you pay for health insurance, more deductions. Ditto for FSA benefits. If you have eligible educational expenses (kid in school/college, spouse getting another degree etc), same thing. If you have receive commuter benefits through work (buying a parking or public transit pass)...you guessed it. (weirdly this is the only deduction you can take for FICA, which is otherwise calculated on gross income). If you're itemizing deductions, there's mortgage interest, state tax, property tax, charitable contributions, car registration fees. I'm sure I'm missing more here because I don't itemize. The point I'm making is, no one takes just the standard deduction. If you're going to add all the other taxes in, you really should count all the deductions you can take too. Add all that in and there's no way you should be paying anywhere close to 30%.
jogjayr 9y ago
Like I mentioned in my reply to the child comment there are also many deductions apart from the standard deduction. There's no way someone with a $100k salary is paying > 30% effective tax rate even after taking into account state tax and FICA if they take advantage of any of the deductions (like 401k, IRA, FSA, commuter benefits, mortgage interest) available to them.
- jogjayr 9y ago
  Downvoters care to comment and tell me why I'm wrong? I'm talking plain numbers based on personal experience. This is not a matter of opinion.
gumby 9y ago
Don't forget those state taxes come straight out of your fed tax calculation.
- gok 9y ago
  For now...
  - gumby 9y ago
    I doubt people would tolerate giving it up. It's like the mortgage interest deduction, which doesn't even help homeowners: it feels like a middle class giveaway and people don't want to lose it. Chopping it would make everybody (except real estate brokers) better off, but the innumerate majority would shriek.
    - gok 9y ago
      The mortgage interest deduction is dumb, but it is marketable as a giveaway to "everyone." The state income tax deduction is both dumb and a handout to state governments and those evil "coastal elites." I think a compromise that might work is similar to what happens with the mortgage interest deduction: a cap. Maybe you only get to deduct state and local income tax up to the top federal tax bracket.
    - AnimalMuppet 9y ago
      Could you explain how the mortgage interest deduction doesn't help homeowners?
      - gok 9y ago
        The argument is usually that it inflates house prices to consume most of the deduction. See also: federal guarantees on student loans have just made tuitions rise to consume the loans. Even if you don't go for that argument... - It disproportionally helps richer people (you get a bigger benefit if you have a $1m house than a $100k house). - It encourages riskier borrowing.
      - 9y ago

The federal income tax isn't the only income tax. There are also state, local, FICA, and medicare taxes. Add those in and someone with a $100K salary ends up in that 30-40% range.

mikeyouse 9y ago

Yep, if you file as a single person making $100k with the standard deduction, you'd pay right around 32% in total tax between State, Federal, and FICA. If you're a married couple making the same amount, you'd pay roughly 29%.

jogjayr 9y ago
FICA contributions top out at $127k gross income. Someone earning $300k/year is paying the same amount in FICA as someone earning $127k. Which I actually think is unfair, but that's another topic entirely. The standard deduction isn't the only deduction available. If you're filing as a married couple and maxing out your 401k and/or IRA you're suddenly saving money and gasp down a couple of tax brackets. A married couple making $100k jointly, and both working jobs with benefits, could put away $36k/year in 401k money alone, which is more than enough for a comfortable retirement after 30 years (and I didn't even take into account any potential employer matching). A couple with one earner can save 23.5k (18k + 5.5k traditional IRA). If you pay for health insurance, more deductions. Ditto for FSA benefits. If you have eligible educational expenses (kid in school/college, spouse getting another degree etc), same thing. If you have receive commuter benefits through work (buying a parking or public transit pass)...you guessed it. (weirdly this is the only deduction you can take for FICA, which is otherwise calculated on gross income). If you're itemizing deductions, there's mortgage interest, state tax, property tax, charitable contributions, car registration fees. I'm sure I'm missing more here because I don't itemize. The point I'm making is, no one takes just the standard deduction. If you're going to add all the other taxes in, you really should count all the deductions you can take too. Add all that in and there's no way you should be paying anywhere close to 30%.

jogjayr 9y ago

Like I mentioned in my reply to the child comment there are also many deductions apart from the standard deduction. There's no way someone with a $100k salary is paying > 30% effective tax rate even after taking into account state tax and FICA if they take advantage of any of the deductions (like 401k, IRA, FSA, commuter benefits, mortgage interest) available to them.

jogjayr 9y ago
Downvoters care to comment and tell me why I'm wrong? I'm talking plain numbers based on personal experience. This is not a matter of opinion.

gumby 9y ago

Don't forget those state taxes come straight out of your fed tax calculation.

gok 9y ago
For now...
- gumby 9y ago
  I doubt people would tolerate giving it up. It's like the mortgage interest deduction, which doesn't even help homeowners: it feels like a middle class giveaway and people don't want to lose it. Chopping it would make everybody (except real estate brokers) better off, but the innumerate majority would shriek.
  - gok 9y ago
    The mortgage interest deduction is dumb, but it is marketable as a giveaway to "everyone." The state income tax deduction is both dumb and a handout to state governments and those evil "coastal elites." I think a compromise that might work is similar to what happens with the mortgage interest deduction: a cap. Maybe you only get to deduct state and local income tax up to the top federal tax bracket.
  - AnimalMuppet 9y ago
    Could you explain how the mortgage interest deduction doesn't help homeowners?
    - gok 9y ago
      The argument is usually that it inflates house prices to consume most of the deduction. See also: federal guarantees on student loans have just made tuitions rise to consume the loans. Even if you don't go for that argument... - It disproportionally helps richer people (you get a bigger benefit if you have a $1m house than a $100k house). - It encourages riskier borrowing.
    - 9y ago