Some quick observations from the TF analysis:
One, it would be helpful if they showed the top rates TODAY compared to Bidens proposed top rates. Is this misleading? I think so. Barring that, it is most helpful to look at the states with no income tax, Texas, Nevada, Florida, etc. You can see their numbers are all the same. Top Rate Biden 52.94%
First, I'm not going to say "the employee bears the burden of the employer portion of Social Security" is bullshit, but... it's bullshit. I'll hit this in another post. The employee DOES bear a piece of it, but probably some insignificant amount. So the real figure is what TF puts in the first column, 49.34%
Second, not all income is taxed the same, and TF doesn't account for this. There is no Social Security Tax on Rental Real Estate Income or Interest Income or Dividend Income or Capital Gains. I'm guessing people in these very high rates have pretty high percentage of their "income" from these types. So 49.34% minus 6.20% gets me to 43.14%.
Just with these points we see that TF overstating the top rate by a lot. A million dollars of income, they say you're paying $529,400 when you're only paying $431,540... 23% more than $431,540...
reply
share
chilidoggg (14587)
4 years ago
We're at Florida top marginal rate 43.14%...
I'll note that the top marginal income tax rate for Reagan's first tax cut, Kemp-Roth 1981, was 50%, and it was 42.5% for Clinton 1993 (Clinton eliminated limit on Medicare)... and 42.5% for Gingrich 1997 (if you want to look at it that way...) Just to keep things in perspective...
As I said above, not all income is taxed the same, and TF doesn't account for this. There is no Social Security Tax on Rental Real Estate Income or Interest Income or Dividend Income or Capital Gains. I'm guessing people in these very high rates have pretty high percentage of their "income" from these types.
....
So today certain (A LOT) Dividend Income is taxed at an effective maximum rate of 23.8%. I don't know how much to subtract from 43.14% to get to 23.8%... it's a lot lower than 43.14%...
reply
share
chilidoggg (14587)
4 years ago
Using the same analysis we used for Florida, we can look at California: Biden top rate 65.29%.
Again the Employer Portion of Social Security is bullshit so the real figure is the second column, 62.64% (I'll err on the high side and say the SALT cap isn't going away)
Again, there's no Social Security tax on Rents and Investment Income, so 62.64% minus 6.20% gets me to 56.44%
The top marginal income tax rate in California, 13.3%, kicks in at $1 million in income. If we're looking at this "$400,000" figure that keeps popping up, that rate is 11.3% (and good up to $590k)
That doesn't mean TF is WRONG about the top rate being 13.3%, but it's a little misleading IMO.
...
It's really a waste of time explaining this, arguing, we really need to eliminate the income tax and just have a flat tax...
reply
share
chilidoggg (14587)
4 years ago
I posted below that IRS tables for 2018 income tax returns filed showed 29.7% for returns between $2 million and $5 million (that's the highest rate I could find for high-income filers.)
So Tax Foundation says top rate for Florida is 52.94% and lowest rate is 49.34%, the difference being the employee-borne portion of Social Security, the difference is 3.60%.
I'll be generous and add the employee AND employer portion of Social Security (even though nobody's going to pay either)
So I take 29.7% plus 6.2% plus 3.6% gives me 39.5% SOAKING WET for no-state-tax states like Florida.
39.5% plus 13.3% California (over $1 million) gives me 52.8% SOAKING WET (which is lower than what Tax Foundation reported for top rate for Florida... and probably STILL lower than Reagan 1981....)
reply
share