[rurp]

Imagine how much federal revenue would increase if that 1% paid the same effective rate as say a typical plumber, rather than the <10% they currently pay. That might actually put a dent in the trillions of dollars this congress is about to add to the national debt.

[coffeecat]

shrug

I hear that sentiment a lot, but it doesn't seem right to me. My salary is pretty close to the median plumber's income, and my family's effective tax rate last year came in at... 1.6%. And that's with all retirement account contributions going toward Roth accounts. If we'd chosen to contribute to traditional IRA/401k accounts instead, the EITC and child tax credit would easily turn our tax bill negative.

[Volundr]

A quick search tells me the median plumber salary is ~$60k. Your telling me your entire tax burden is ~1k? I find that hard to believe, and if true is pretty darn atypical. That's closer to what I was paying when I was making ~10/hr.

[coffeecat]

Yes. We had $50k of taxable W2 income ($63k including pre-tax insurance premiums and HSA contributions), $13k of taxable family leave benefits, $4k of interest/dividends (mostly qualified dividends, taxed at 0%), and $9k of long-term capital gains (taxed at 0%), making our pre-tax gross income about $89k. Only $66k of that is subject to taxes; the standard deduction brings that down to $37k, on which the tax is $4k. With a $2,000 child tax credit, $400 saver's credit, and $200 foreign tax credit, our tax liability is reduced to $1400, which is 1.6% of $89k.

[inglor_cz]

"That might actually put a dent in the trillions of dollars this congress is about to add to the national debt."

It might also result in even more spending. I don't think that there is any "natural ceiling" when it comes to willingness of politicians to spend other people's money. The only ceiling is external - how much will the system bear.

[WalterBright]

> rather than the <10% they currently pay

I suspect you're using a different definition of "income" than the IRS. What is it?

[rurp]

The amount they report on their tax returns.

[WalterBright]

There's no case where that's true.

[twoodfin]

https://www.pewresearch.org/short-reads/2023/04/18/who-pays-...

For one thing, many plumbers do make it to the 1%: Trades are a profitable line of work for the industrious.

But the median 1%’er is paying 3-4X the effective rate of the overall median earner.

[CursedSilicon]

So if they're earning 50x as much, why are they only paying 3-4x the tax?

[WalterBright]

>> is paying 3-4X the effective rate > why are they only paying 3-4x the tax?

You have conflated the tax rate with the tax amount.