5 ms·

Well put, but the top income tax rate in the US is now nearly 40%. Plus there's 12.4% for Social Security (employer+employee but it is economically all your sa

Well put, but the top income tax rate in the US is now nearly 40%. Plus there's 12.4% for Social Security (employer+employee but it is economically all your salary) and state income taxes. And if you invest anything after that, there's capital gains and dividend taxes.

greghinch 13y ago
I think the parent was referring to effective tax rate. Tax rates are applied in graded steps, so you will only pay 40% on income over a certain amount.
- jacques_chester 13y ago
  As your total income rises, your effective tax rate converges to the headline marginal rate. (Granted this is a mathematical problem for millionaires, but still...)
  - dripton 13y ago
    Except that the truly rich tend to get most of their income from capital gains rather than wages and salaries, and there's a much lower rate for capital gains than for earned income. The "Buffet pays a lower tax rate than his secretary" problem.
    - jacques_chester 13y ago
      Quite, though the arrangements vary from place to place. There's a lot distortion and unseemly outcomes that flow from having misaligned personal, capital gains and corporate tax rates.
- beefman 13y ago
  Unless you pay the AMT.
kip_ 13y ago
Social Security taxes are only on the poor and middle class. If you make more than $113,700/year you're only out the $14,098.80 Source: http://www.ssa.gov/pubs/EN-05-10003.pdf http://www.ssa.gov/pubs/EN-05-10003.pdf
- Game_Ender 13y ago
  SSI is forced retirement savings program. You get out an amount proportional to what you pay in. It makes sense from that perspective to have a cap on the amount of income taxed, because they have cap on the benefits you can receive.
  - hobs 13y ago
    Except that it is a was originally designed as a widows benefit. It is not about getting what you put in, it is about a safety net for old poor people who have no income, whether or not you agree that we should do that, to me it is clear that is what the goal of SSI clearly is.
beefman 13y ago
Total FICA is 15.3%. And don't forget sales tax (approaching 10% where I live, on purchases made with after-tax income).

greghinch 13y ago

I think the parent was referring to effective tax rate. Tax rates are applied in graded steps, so you will only pay 40% on income over a certain amount.

jacques_chester 13y ago
As your total income rises, your effective tax rate converges to the headline marginal rate. (Granted this is a mathematical problem for millionaires, but still...)
- dripton 13y ago
  Except that the truly rich tend to get most of their income from capital gains rather than wages and salaries, and there's a much lower rate for capital gains than for earned income. The "Buffet pays a lower tax rate than his secretary" problem.
  - jacques_chester 13y ago
    Quite, though the arrangements vary from place to place. There's a lot distortion and unseemly outcomes that flow from having misaligned personal, capital gains and corporate tax rates.
beefman 13y ago
Unless you pay the AMT.

kip_ 13y ago

Social Security taxes are only on the poor and middle class. If you make more than $113,700/year you're only out the $14,098.80 Source: http://www.ssa.gov/pubs/EN-05-10003.pdf http://www.ssa.gov/pubs/EN-05-10003.pdf

Game_Ender 13y ago
SSI is forced retirement savings program. You get out an amount proportional to what you pay in. It makes sense from that perspective to have a cap on the amount of income taxed, because they have cap on the benefits you can receive.
- hobs 13y ago
  Except that it is a was originally designed as a widows benefit. It is not about getting what you put in, it is about a safety net for old poor people who have no income, whether or not you agree that we should do that, to me it is clear that is what the goal of SSI clearly is.

beefman 13y ago

Total FICA is 15.3%. And don't forget sales tax (approaching 10% where I live, on purchases made with after-tax income).