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by EdwardDiego 4547 days ago
> Personal income taxes are about 50% in the US.

I'm not American, but every time I look at taxation levels, I come out with a number significantly smaller than that. I presume that America uses progressive taxation, so at what income level does personal income + payroll tax equate to 50% of gross?
2 comments
derekp7 4547 days ago
According to the 1040 tax tables, 100,000 gets taxed at 21,454, so that is 21.4%. Add on 15% FICA (if self employed), 5% state tax, and you are up to 41.4%. Now if you own a house that the county assessor says is worth $200K, you are talking about 8K a year in property tax (this will vary by area, but is true for where I'm at in the midwest). That leaves $55,546 out of the 100,000 to spend. Ok, now try to spend it -- you will pay 8% in sales taxes, for another $4443.68. So all you have left is a shade over 51k, out of that initial 100K that you earned. So not quite 50% taxation, but close enough (actually, some sales taxes are higher, such as gasoline, etc).
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EdwardDiego 4546 days ago
That FICA number is high, at least according to Wikipedia.

> Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business's net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees.

The rest of your figures aren't really what I'd consider personal income taxation, although they're definitely interesting. Also interesting is that married people in the US of A experience a tax advantage when filing jointly - not so our tax code, it's very theoretically pure.

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derekp7 4546 days ago
I also didn't include the fact that state income tax, and property tax are deductible from federal income. Also mortgage interest is deductible. So, back of the envelope comes down to closer to 42% taxation.

> The rest of your figures aren't really what I'd consider personal income taxation, although they're definitely interesting

I'd say that sales tax is personal, but property tax maybe not, since that isn't directly related to income. However, it still means that for every dollar that someone pays you to do work, you only get to spend 58 cents.

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EdwardDiego 4546 days ago
> I'd say that sales tax is personal

Does US sales tax apply to purchases by a business?

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derekp7 4545 days ago
Yes, for purchases that are consumed within the business (such as office supplies, etc). However anything purchased for resale does not get sales tax -- as that tax will be collected later when the item is sold to at retail.
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nbouscal 4546 days ago
> Also interesting is that married people in the US of A experience a tax advantage when filing jointly

It's not quite that simple. Filing jointly confers a tax advantage when the couple makes relatively little, but becomes neutral as they earn more, and is actually a tax disadvantage when the couple makes a significant amount.

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dragonwriter 4546 days ago
The advantage to filing jointly is actually when the couple makes sufficiently different income, and the penalty is actually when they are close in income.
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nbouscal 4546 days ago
I was simplifying, and your simplification is more accurate, but neither simplification quite captures it. Both aspects play a role, with the amount the couple makes essentially scaling the benefit or detriment. If a couple makes the exact same amount but it's a low amount, there's zero detriment, but if it's a high amount there's a significant detriment. If they make very different amounts and it's a low amount, there's a significant benefit, but the size of that benefit decreases and can disappear entirely as they make more.
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EdwardDiego 4546 days ago
> It's not quite that simple.

That could be the catchphrase for the entire US tax code. :D

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stirno 4547 days ago
You'd need to combine a very very high income level (well above $450k/yr with lots of money getting taxed in the highest federal nominal bracket), live in a state with high income tax and have a bad accountant.

In short, if anyone is paying that much in taxes they are very much doing it wrong... and I kind of doubt people are.

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