4 ms·

This is not remotely true. I make more than that, and my effective tax rate is 27%. This because, US has a very convoluted tax system with a whole bunch of dedu

by dmode 7y ago

This is not remotely true. I make more than that, and my effective tax rate is 27%. This because, US has a very convoluted tax system with a whole bunch of deductions. And both Fed and state tax systems are progressive, so you simply cannot add them up, since only a portion of that is applied to your highest income level. Not factor in property related deductions, health care related deductions, children related deductions, and various investment loopholes.

rayiner 7y ago
Note that the 50% figure is marginal tax rate. In California, it’s basically what you pay in your 500,000-th dollar. Which is higher than the 45% you’d pay in the UK. (Though the tax burden is higher in the U.K. unless you make millions because the brackets kick in earlier.) The figure I cited above is from a tax calculator that I’ve found to be pretty accurate. Note that the various deductions are much less valuable for high income earners under Trump’s new tax plan due to the limit on SALT deductions. Finally, while the calculator I used excludes US credits for healthcare, children, etc., the calculator I used for the U.K. also does that. The hypothetical is basically a single Google programmer who rents and has no kids.
- gamblor956 7y ago
  You are literally just spreading a lie over and over again. CA's top marginal tax rate is 12.3%. If it were >50% no rich person would live in the state. The combined state and federal rate is not >50% either, and any calculator that claims otherwise is lying. And that's before you even take deductions into account. If you're paying >50% marginal tax rate in CA, your accountant should be fired. And possibly investigated for embezzling funds from you in the form of "tax payments."
  - rayiner 7y ago
    I think it’s pretty clear from my post that I’m talking about combined state and federal taxes in California, especially given the comparison to the U.K. which has a single level of income tax. It makes no sense to just look at state taxes, because a lot of federal taxes go back to the state as grants (transit, highway, Medicaid, ACA subsidies, education), or go to pay for social services the state would otherwise have to pay for itself (Medicare, Social Security, food security, etc.) As to the combined marginal rate, it’s 50.75% on labor income above $576,000 (12.3% state, 37% federal, 1.45% Medicare). Then there is a 1% surcharge on incomes over $1 million. I’m not sure why you’re talking about dedications because that won’t affect the top marginal rate.
    - dmode 7y ago
      I don’t know how tax system works in the UK, but to calculate US taxes you cannot just simply add the tax rates. Because taxes in the US are progressive. For both Fed and CA taxes, your first $x gets taxed at a lower rate, next $y gets taxed at a slightly higher rate. The highest rate kicks in >$1mn. Then we have a standard deduction of $23k for married couples. Which means $23k of your income is not taxed. Then state taxes are deductible on your Fed income, which means you can subtract the state taxes to calculate your Fed tax income bracket. Then there are myriad of deductions for property tax, mortgage, child care, health care, etc etc. Finally SSN and Medicare tops out at $100k, and you don’t pay beyond that. Net effect is you are probably paying close to 25-30% in effective tax rate
      - usaar333 7y ago
        You are talking about effective rates (affected by deductions); parent (and I below) are talking about marginal rates (the rate isn't generally affected by deductions - only the income theshold)
  - usaar333 7y ago
    > The combined state and federal rate is not >50% either, and any calculator that claims otherwise is lying. Why are you so confident here? The top CA marginal rate is 13.3%. Top federal marginal rate is 37%. Medicare tax is 1.45%. simple addition gives a top marginal rate for wage income of 51.75%. I have no idea how your accountant can get that lower.
    - gamblor956 7y ago
      The top marginal rate in California is 12.3%. The 1% is a separate levy, so if your take that into account you have to do the same for your comparison rates. And then you find that your tax burden in Texas ends up being close to the same as it was in California, but your taxes in Texas don't get you any public services.
    - dmode 7y ago
      See my reply above

by dmode 7y ago

rayiner 7y ago

Note that the 50% figure is marginal tax rate. In California, it’s basically what you pay in your 500,000-th dollar. Which is higher than the 45% you’d pay in the UK. (Though the tax burden is higher in the U.K. unless you make millions because the brackets kick in earlier.) The figure I cited above is from a tax calculator that I’ve found to be pretty accurate. Note that the various deductions are much less valuable for high income earners under Trump’s new tax plan due to the limit on SALT deductions. Finally, while the calculator I used excludes US credits for healthcare, children, etc., the calculator I used for the U.K. also does that. The hypothetical is basically a single Google programmer who rents and has no kids.

gamblor956 7y ago
You are literally just spreading a lie over and over again. CA's top marginal tax rate is 12.3%. If it were >50% no rich person would live in the state. The combined state and federal rate is not >50% either, and any calculator that claims otherwise is lying. And that's before you even take deductions into account. If you're paying >50% marginal tax rate in CA, your accountant should be fired. And possibly investigated for embezzling funds from you in the form of "tax payments."
- rayiner 7y ago
  I think it’s pretty clear from my post that I’m talking about combined state and federal taxes in California, especially given the comparison to the U.K. which has a single level of income tax. It makes no sense to just look at state taxes, because a lot of federal taxes go back to the state as grants (transit, highway, Medicaid, ACA subsidies, education), or go to pay for social services the state would otherwise have to pay for itself (Medicare, Social Security, food security, etc.) As to the combined marginal rate, it’s 50.75% on labor income above $576,000 (12.3% state, 37% federal, 1.45% Medicare). Then there is a 1% surcharge on incomes over $1 million. I’m not sure why you’re talking about dedications because that won’t affect the top marginal rate.
  - dmode 7y ago
    I don’t know how tax system works in the UK, but to calculate US taxes you cannot just simply add the tax rates. Because taxes in the US are progressive. For both Fed and CA taxes, your first $x gets taxed at a lower rate, next $y gets taxed at a slightly higher rate. The highest rate kicks in >$1mn. Then we have a standard deduction of $23k for married couples. Which means $23k of your income is not taxed. Then state taxes are deductible on your Fed income, which means you can subtract the state taxes to calculate your Fed tax income bracket. Then there are myriad of deductions for property tax, mortgage, child care, health care, etc etc. Finally SSN and Medicare tops out at $100k, and you don’t pay beyond that. Net effect is you are probably paying close to 25-30% in effective tax rate
    - usaar333 7y ago
      You are talking about effective rates (affected by deductions); parent (and I below) are talking about marginal rates (the rate isn't generally affected by deductions - only the income theshold)
- usaar333 7y ago
  > The combined state and federal rate is not >50% either, and any calculator that claims otherwise is lying. Why are you so confident here? The top CA marginal rate is 13.3%. Top federal marginal rate is 37%. Medicare tax is 1.45%. simple addition gives a top marginal rate for wage income of 51.75%. I have no idea how your accountant can get that lower.
  - gamblor956 7y ago
    The top marginal rate in California is 12.3%. The 1% is a separate levy, so if your take that into account you have to do the same for your comparison rates. And then you find that your tax burden in Texas ends up being close to the same as it was in California, but your taxes in Texas don't get you any public services.
  - dmode 7y ago
    See my reply above