3 ms·

I see multiple people in this thread talking about high taxes without knowing how tax brackets actually work in reality. I wish people understood them. It's ver

I see multiple people in this thread talking about high taxes without knowing how tax brackets actually work in reality. I wish people understood them. It's very easy to senationalize high taxes. I'll make up some numbers to make it simple. Let's say there's 2 brackets. Everyone who makes under $399,999.99 pays 0% tax. And everyone who makes over $400k pays 90% tax. You make $400k. How much do you owe the taxman? Did you know it's only 90 pennies out of $400k? The first $399,999.99 you make is in the 0% bracket. It will always be taxed at that rate. Only the amount over that ($1) will be taxed in the next bracket. Now in reality, we have 7 tax brackets. This is how much you really pay, assuming filing single for 2020. $9875 of $400k @ 10% $30,250 of $400k @ 12% $45,399 of $400k @ 22% $77,775 of $400k @ 24% $44,049 of $400k @ 32% $192,649 of $400k @ 35% You wouldn't even make enough to pay anything into the 7th bracket @ 37%. Personally, I believe yes, we need to raise taxes on the uber rich just to slow their growth. NO, it will not affect you who make $400k (which is already wealthy compared to most of America!) And add more brackets while we're at it. There was a time in America where the uber rich had a 94% tax bracket. I'm not saying we need to go that high. But 37% and too many deductions is a joke.

lend000 5y ago
I don't think anyone on either side of this thread is confused by this simple concept. But perhaps in writing your own comment you realize how unprogressive these tax brackets are. You start paying pretty close to the top rate on income over 44,000. And then it stops increasing at a tiny fraction of the incomes of the truly wealthy (the wealthiest of whom don't need help from offshore tax gymnastics -- they just pay the highest rate on the capital gains bracket which is even LESS progressive). Not to mention people making ~400K are also significantly affected by employment taxes (social security and medicare) which are extremely anti-progressive. So a tax increase at 400K will indeed affect someone who makes 400K (or maybe ~450K, or someone who files jointly) now or in the ensuing years when they get raises to combat inflation. The brackets never keep up with inflation, because the government uses CPI to pretend like there isn't much inflation. The highest bracket in 1913 was 1 million dollars (NOT ADJUSTED FOR INFLATION).
- gzer0 5y ago
  Sure, the tax bracket in 1913 might have been 1 million USD (not adjusted for inflation). The highest tax bracket was also paying 67 percent in 1917 and 77 percent in 1918 [1]. During WW2, the tax rate for the highest bracket jumped to a whopping 94% [1]. Most people don't realize how low the rates have gotten compared to previous times. Subsequently, as rates have gotten lower, the income inequality gap is near all-time highs [2]. [1] https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco... [2] https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/ https://www.pewresearch.org/social-trends/2020/01/09/trends-... Note: I'm not saying correlation = causation; just an interesting phenomenon to notice.
  - lend000 5y ago
    I'm in agreement. But to tax people 67% starting at 400K is ludicrous to me, barring emergency wartime measures (although nowadays the Fed would just print the money and dissolve the value of USD). That 67% rate was for income over TWO MILLION (not inflation adjusted). Using the extremely conservative CPI figure, that's over $25M USD today. Using the median price of a home in the US for inflation, that's nearly $100M. A much more sensible maximum bracket than what we have today. The point is that the distribution of tax rates is broken, with no statement made about the rates themselves.

lend000 5y ago

I don't think anyone on either side of this thread is confused by this simple concept. But perhaps in writing your own comment you realize how unprogressive these tax brackets are. You start paying pretty close to the top rate on income over 44,000. And then it stops increasing at a tiny fraction of the incomes of the truly wealthy (the wealthiest of whom don't need help from offshore tax gymnastics -- they just pay the highest rate on the capital gains bracket which is even LESS progressive). Not to mention people making ~400K are also significantly affected by employment taxes (social security and medicare) which are extremely anti-progressive. So a tax increase at 400K will indeed affect someone who makes 400K (or maybe ~450K, or someone who files jointly) now or in the ensuing years when they get raises to combat inflation. The brackets never keep up with inflation, because the government uses CPI to pretend like there isn't much inflation. The highest bracket in 1913 was 1 million dollars (NOT ADJUSTED FOR INFLATION).

gzer0 5y ago
Sure, the tax bracket in 1913 might have been 1 million USD (not adjusted for inflation). The highest tax bracket was also paying 67 percent in 1917 and 77 percent in 1918 [1]. During WW2, the tax rate for the highest bracket jumped to a whopping 94% [1]. Most people don't realize how low the rates have gotten compared to previous times. Subsequently, as rates have gotten lower, the income inequality gap is near all-time highs [2]. [1] https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco... [2] https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/ https://www.pewresearch.org/social-trends/2020/01/09/trends-... Note: I'm not saying correlation = causation; just an interesting phenomenon to notice.
- lend000 5y ago
  I'm in agreement. But to tax people 67% starting at 400K is ludicrous to me, barring emergency wartime measures (although nowadays the Fed would just print the money and dissolve the value of USD). That 67% rate was for income over TWO MILLION (not inflation adjusted). Using the extremely conservative CPI figure, that's over $25M USD today. Using the median price of a home in the US for inflation, that's nearly $100M. A much more sensible maximum bracket than what we have today. The point is that the distribution of tax rates is broken, with no statement made about the rates themselves.