[dragonwriter]

> Personal income taxes are about 50% in the US.

No, they aren't. There are a handful of states where the top marginal rate (combining federal and state rates) is at or above 50%, but that's not the overall rate even for those top earners, and its certainly not the average overall rate in the country.

[001sky]

Its not an unrealistic marginal rate for NYC or perhaps even parts of California.[1] This is a case where 'average' is often misleading. When you take a salary...its a take it/leave it package (X net of tax). When you are self-employed, you are always deciding: do I do another X for another Y in return. At that stage, its all about marginal ROI from your time.

[1] Because of the real estate, many of these types of places are not really 'livable', and you see entry level jobs that offer salaries already at or neat the top tax brackets (despite the fact that these people have few/no assets or real 'net worth').

[dragonwriter]

> Its not an unrealistic marginal rate for NYC or perhaps even parts of California.

The claim was that personal income tax "in the US" was about 50%.

That's very different than saying the truth which is that "maximum marginal income (including payroll) tax rates in the highest-tax US states are around 50%".

> you see entry level jobs that offer salaries already at or neat the top tax brackets

The top US federal marginal rate starts at $400,001 for a single filer; $450,001 for married filing jointly/qualified widow(er), $225,001 for married filing separately, and $425,001 for head of household.

I've never seen anything fairly described as entry-level offering a salary at or near that, even in expensive places like SF.

[001sky]

Fair enough, but by 'the top tax brackets' I meant those sufficient to trigger combined taxation approching 50%,

eg, $90K in California? back of the envelope

28% $87,850 to $183,250 Federal Rate

15.30%* Social Security, self employed

8.8% State-Level taxes

=======

~ 52% Aggregate tax rate (excluding 9% sales tax average).

This is not an average rate, nor does it include the provision of the healthcare mandate. In any event, this is meant to be illustrative only, and the marginal and average dynamics play out differently at higher rates (for a variety of reasons, including tax-sheltering and regressive taxes on payroll and sale/consumption taxes).

[stevenwei]

It doesn't make any sense to add up the highest marginal tax rates like that though.

In your example of someone earning $90k in CA, the federal income tax rate of 28% only applies to the $2150 of income above the threshold of $87,850, the rest is taxed at lower rates according to the lower brackets. The same applies to state taxes, except the brackets are different.

The effective tax rate (e.g. the total amount of tax you pay / your total income) has a lot more meaning, and that one is a lot lower than 50%.

The original claim that started this thread, "Personal income taxes are about 50% in the US", is not true at all.

[dragonwriter]

> 52% Aggregate tax rate (excluding 9% sales tax average).

No, its a 52% combined marginal rate, not a 52% tax rate. And, since we're talking about taxes on income, "excluding 9% sales tax" is a red herring, because sales tax is not a tax on income. (And California's statewide sales tax is 7.5%, not 9%.)

> In any event, this is meant to be illustrative only

And what it fails to do is illustrate that the claim "Personal income taxes are about 50% in the US" is true. the fact that if you choose one of the states with the highest state taxes on personal income (including both income and payroll taxes), the top marginal tax rates on personal income just exceed 50% does not mean that personal income taxes in the US are about 50%. In fact, it demonstrates that personal income taxes in the US are generally substantially less than 50%.

[001sky]

its a 52% combined marginal rate,

Exactly. The. Point. Go read the my comment in context... Not only do I set out to illudtrate the marginal tax rate, I expressly not that it is not the average rate. There is a reason for that, which I mention earlier...too. Which I won't repeat myself to point out here.

[stonemetal]

Nope. The federal Rate would be much lower. You would be in the 28% tax bracket but your tax rate wouldn't be 28%. [1] Grabbing a random tax calculator on line suggests that at 90K of gross income the highest your federal tax rate could be is about 16.6%.

[1]http://www.calcxml.com/calculators/federal-income-tax-calcul...

[001sky]

We can easily qualify the example to avoid using a black box...whether its 'taxable' income or 'marginal tax rate' etc. (which are actually implied). If you're saying something beyond this, then just say it.

[davidw]

Nathan lives in Idaho, IIRC.

[001sky]

There are several states without income taxes and/or sales taxes as well (NV, OR, TX, FL). Depending upon your income stream/sources and lifestyle this is hugely important. Once you retire...for example...you may spend more than you earn...or you may buy a car (that last 10 years). For other people, its real-estate (maintenance) taxes that are a function of asset-bases (often inflated, and not income). {etc}

[davidw]

Yes, Oregon has no sales tax. Whenever I go there (home), I always load up on stuff - the VAT here in Italy is 22%!

[kybernetyk]

Technically you would be required to pay the VAT on imported goods to the EU - even if they are considered duty free.

[nbouscal]

You are correct, and I'm just nitpicking, but I do think it's worth pointing out that in NYC the effective tax rate can get close to 50% even for relatively entry-level salaries (low six-figures). Federal, State, and Local income taxes, plus FICA taxes... it adds up. For top earners, effective rate can definitely reach 50%. Again, I'm just being pedantic; you're absolutely right that in most of the country the effective rates are nowhere near that high. Sadly, most people just don't understand how marginal rates work.