I get that 50% is a nice round number, but what's the moral or reasonable significance of that?
Meanwhile, you're looking at top marginal rates. That's not the total rate. A single person making $500k a year has a total tax rate (federal plus state) of 41%. It gots up to 46% at $1,000,000/yr.
And the rate goes down if they marry, have kids, etc.
quick calculation comes to about a 45% tax rate for single in CA and 42.4% for married. So 50% is a small exaggeration, but it's definitely closer to reality than 30-35% underestimate.
For a single person, you'll hit that tax bracket after more than $500,000 in income. This is an absolutely enormous amount of money - roughly 10x the median income. I have absolutely zero problem with income beyond this amount being taxed at 50%.
I make around $600,000. My effective federal tax rate is in the low-mid 20s. I'd have to make way way way more money for my effective federal + state rates to approach 50%.
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.
50% is super high in the US, generally speaking, especially for income in that range. The person may be overpaying in taxes, or is including other stuff in 'taxes', or has an incredibly high local/state tax rate. A single person with no dependents earning $72k/year would, generally speaking, have a federal tax burden of around $8900 - 12%.
Total tax rate of 50%? This sounds extremely high. Are you sure you are not confusing between marginal and total tax rate? If you prepare you taxes with any software package, it usually tells your effective tax rate, does it really say 50% or near that? I checked back and they year I paid the most taxes I had effective rate of 24%, usually it's even less. I know software devs who make way more than me, but I don't see how even that would take them to 50%.
Is "close to 50%" the going marginal tax rate in general? I calculate ~30% federal + ~10% California + possibly ~6% social security & Medicare to get that number; did I miss anything? (current grad student with a marginal rate a lot closer to 20%, haven't had the joy of full-on taxes yet)
This person is ultra high income if their marginal tax rates are 50%. They didnt give numbers but using an online calculator [0] and assuming a high tax state (CA), you need to be above $500k a year income to hit 50% marginal rates. That is also assuming you are single, a married person would need a combined income nearly twice that to hit 50%.
>You’re paying almost 50% around high six figure range.
That's a gross oversimplification and thus very misleading. While your marginal tax rate on taxable income (not gross income) might be close to 50%, if you are married filing joint, a homeowner, and have children, you are not paying anywhere near 50% effective tax rate[0] on your total income, due to deductions and exemptions, credits, tax-deferred retirement contributions, tax-free health insurance, and progressive tax brackets.
[0] "effective tax rate" does not have a universally agreed single definition, but the statement holds for most reasonable definitions.
He is not saying "income tax rate is 50%". Please pay attention.
The half of the income comes from the estimates of how much you pay taxes in total. Including property, sales tax, various fees and tariffs, and, most importantly, portion of corporate and other taxes that the consumer pays as part of the prices of goods and services.
Ya, someone single making $150k/year is paying an effective state income tax rate of 7% (and an effective federal income tax rate of 17.82%). But I get the very conservative simplifications parent was making to make their point.
Paying 50% of your salary can be "ok" for a rich person, tough on middle class families with children, and impossible for a poor person (difference between making and not making rent).
This is why tax rates aren't constant for all incomes, they depend on income, costs (family, children, etc.), etc.
My tax rate would be slightly over 40% if I were single, but my partner's income isn't as high (still over >35% taxes), and we have two children. We get taxed as a family, so our incomes kind of get added and divided by four, and then our "family" tax rate is ~30%.
If you earn a lot of money and have no family / children to care for, then you get taxed with the highest rate which is slightly less than 50%.
If that's not your situation, your tax rate will be lower.
Also, there are some ways to delay paying at least a portion of your taxes (e.g. by getting stock compensation, and paying the taxes on the original price of the stock much later when you sell, etc.), which are often used for high paying jobs (somebody working on a dinner doesn't get "stock").
Having said all this, I've payed almost 50% taxes before, and it was ok. My net salary was still way above the median, and the cost of living here is relatively cheap.
The only real difference of this tax systems are (1) all the benefits that you get, and (2) the variable tax-rate widens the middle class significantly: it is harder to become "poorer" if your salary decrease because the tax rate decreases with it, and it is harder to double your net salary because the tax rate grows with salary increases, at least up to the almost 50% limit.
Many of the benefits are just the outcome of having a large number of people that live with 1 job, working 35h/week, and that don't have to look at their bank account ever to see if they'll make it to the end of the month.
Just one note: 45% is the top marginal tax rate. No one is actually taxed such that they lose 45% of their income through personal income taxes. The effective (average) tax rate will be much, much less.
EDIT: not to mention lower taxes due to deductions, capital gains, legal tax shelters.
The top marginal income tax bracket isn't the place where you pay the highest combined income + payroll tax, since the the larger part of tax is capped and it is otherwise flat, not progressive.
If your paying close to 50% combined, it probably means you'd pay less, as a percentage, if you made more. Getting close to 50% total rate is hard.
Meanwhile, you're looking at top marginal rates. That's not the total rate. A single person making $500k a year has a total tax rate (federal plus state) of 41%. It gots up to 46% at $1,000,000/yr.
And the rate goes down if they marry, have kids, etc.
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