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FICA alone is 15.3% starting from the first dollar earned. Add in local income and sales tax and I don’t see how anyone who earns money could be paying a single
by mikeash 8y ago
FICA alone is 15.3% starting from the first dollar earned. Add in local income and sales tax and I don’t see how anyone who earns money could be paying a single digit rate.
- WkndTriathlete 8y agoIf no one can claim you as a dependent the bottom 40-45% gets every single dime of that FICA tax back (through credits/etc.) on their tax return.
- klipt 8y agoHalf of FICA is paid by the employer. And low earners actually pay negative federal taxes (Earned Income Tax Credit).
- mikeash 8y agoBeing paid by the employer is an accounting gimmick meant to make the rate look lower than it is.
- bluGill 8y agoEffective rates. The child tax credit; 401k and other income deductions; the standard deduction, - it all adds up. Your tax can be much less than the minimum rate if you want. (of course this is about trade offs, if you don't otherwise want a kid the child tax credit isn't of much use)
- mikeash 8y agoDeductions don’t affect FICA or sales taxes.
- nickjj 8y agoYeah, it's brutal. By the time you account for income tax, FICA tax, state tax and health insurance you can say good bye to about 40-45% of your income at an average software developer wage who happens to be self employed. That's effective rates too.
- fwip 8y agoYeah, but "average software developers" aren't poor.