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Comment by jonthepirate | Hacker News Reader

Sure glad my taxes are 55%

I don't mind paying high taxes in the US... I mind that it just seems to get pissed away on literally nothing.

It wasn't _literally_ nothing. Think of all the companies that made billions in profits from all this.

Since this is based on US spending I am assuming you are talking about US taxes, in which case, no you are not paying 55% in taxes.

I guess if you live in a high income tax state, make more than the AMT threshold, max out your 401k and health insurance, etc. and compare your employer's cost to employ you by what gets deposited in your bank account at the end of the month, you can end up with a number like this. I agree that it's misleading, because your 401k, health insurance, etc. aren't taxes, and neither is your employer's payroll tax (for you anyway), but on some level it makes sense -- $200,000 a year leave your employer's bank account, and $100,000 a year ends up in yours. It's misleading to call that a 50% tax, but more like 50% overhead-some-of-which-goes-to-the-government-and-some-of-it-pays-for-other-peoples-healthcare-and-some-of-it-makes-up-for-how-useless-social-security-will-be-when-you-retire. That's a mouthful, so I can see why people map that to "tax" in their mind ;)

BTW, reading some of the other comments in this thread -- they point out property tax and sales tax. Good call.

The top US tax bracket is 37% and top California bracket is 13.3% for a total marginal rate of of 50.3%. If you're self-employed or a contractor you'll have the employer side too so I could see that hitting 55%. And that's just income tax; property and sales tax could easy push higher than that.

A poor person isn't paying that rate, but a wealthy person may well

1. Marginal tax rate. Effective is much lower. For example, I am in the 24% marginal bracket(almost in the 32% bracket, but my effective tax rate is below 15%.

2. FICA-SS makes up the majority of FICA tax and caps out at ~$140k which means that it has diminishing effective tax rate beyond that amount. Though Medicare does go from 1.45 up to 2.something at some amount of income.

3. Tax rates generally don't stack the way that you made them. ie: You can't just add tax rates together.

4. Sales and Property taxes are consumption taxes and are choices.

You can play all these games about taxes, but when you actually do the tax math, it's never as much as people think it is. That's not to say taxes aren't high in California: https://smartasset.com/taxes/california-tax-calculator#vDUUV..., but being single and earning $1MM gets you to like a 47% effective tax rate. Even with a large property tax bill and sales tax, you aren't getting to 55%.

Having your entire income taxed at the top marginal tax rate is like running a marathon with no legs.

50.7% for income over $518,400. The effective income tax rate for everyone but billionaires is far below that.

There are three orders of magnitude between the number you quoted and one billion. Also note that at the billionaire scale, there are cost effective ways to avoid taxes such that one’s effective rate is less than that of a typical hundred-thousandaire.

If you're making $10 million per year in a high tax state like California, your effective tax rate is still only 52%

You need to add sales tax and property tax possibly. Sales tax is approximately 9%. Property tax is about 1% of inflation adjusted value of the property.

Clearly not directly, but if you fold in non-tax payments that are commonly paid for with taxes in other countries, or taxes paid by your employer for the privilege of having you on their payroll, then maybe it is close to 55%? Income tax, social security, medicare, your personal healthcare, payroll taxes, sales tax, etc.

it’s not unlikely at all.

esp if you consider your employer also pays income taxes for the value you generate to the tune of another 20-40%.

If he's making a high salary in NYC, or California, why not?

Because the math doesn't work out.

37% federal, 13.3% california = 50.3

Most wealthy people spend another 1-2% of their income on property taxes and a bit on sales taxes, etc. I estimate I pay 53% of my income to taxes. I agree that 55% is unlikely tho

The 37% and 13.3% are on marginal income, as I'm sure you know. The effective tax rate is much lower.

California and some other states also have required disability insurance that is taken out with the state income tax. It's 1% in CA.

And I would count Social Security and Medicare too, equally 7.65%. But the SS part has a cap so the percentage goes down the more you make.

All put together, someone making $250K pays about 37% on that to various income taxes listed above. If you were making 1M income a year, that rises to 47%. For 100K, it's about 30%.

How much is also taxed on the employer payroll side?

The employer pays the same social security and medicare taxes as the employee and also has a cap on the social security part, plus in some cases an unemployment tax.

If you want to include employer taxes, to calculate if the employer wants to pay you 250K how much you would get, then it's be about 42%. At 100K, it'd be about 38% since you don't reach the SS cap.

Of course, there's a couple other tricks in there, like the government can embed some tax into the healthcare costs which are required for employers to buy, but then there's also deductions that are hard to turn into a percentage like this.

The federal rate is progressive and not on the entire income. 37% applies only on the taxable income above $518K. Why is this misrepresentation?

I spent an hour arguing about taxes with someone until I realized that they didn't understand how marginal taxes worked. I bet you dollars to donuts that if you start talking about taxes in a room full of upper-middle class people, one will tell you about people choosing not to earn more money so they don't get "bumped" into a higher tax rate.

You don't pay 37% federal. 37% is only for the top bracket.

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