
Your real tax rate: 40% - wallflower
http://articles.moneycentral.msn.com/Taxes/Advice/YourRealTaxRate40.aspx
======
rada
The actual paper is here:

[http://www.kotlikoff.net/sites/default/files/Does%20It%20Pay...](http://www.kotlikoff.net/sites/default/files/Does%20It%20Pay,%20at%20the%20Margin,%20to%20Work%20and%20Save.pdf)

and perhaps the most practical bit is here:

 _The paper provides four main takeaways. First, thanks to the incredible
complexity of the U.S. fiscal system, it's essentially impossible for anyone
to understand her incentive to work, save, or contribute to retirement acounts
absent highly advanced computer technology and software. Second, the U.S.
fiscal system provides most households with very strong reasons to limit their
labor supply and saving. Third, the system offers very high-income young and
middle aged households as well as most older households tremendous
opportunities to arbitrage the tax system by contributing to retirement
accounts. Fourth, the patterns by age and income of marginal net tax rates on
earnings, marginal net tax rates on saving, and tax-arbitrage opportunities
can be summarized with one word - bizarre._

~~~
kenjackson
I don't get the arbitrage takeaway? I thought that income tax was only a part
of the puzzle. Maybe half. The other taxes you pay aren't affected by what you
put in retirement accounts.

~~~
rada
Tax arbitrage means using the difference in tax rates to make extra money. If
the tax rate when you contribute to a tax-deferred investment account is
higher than the tax rate when you pull the money out, voila, you've profited
from tax arbitrage. So I am not sure why you are thinking of income vs. other
taxes. The authors are simply saying, if you are a high earner in a top
federal tax bracket, it really pays to put money into tax-deferred
investments.

~~~
kenjackson
OK, I thought the takeaways were implying that you were finding some
inefficiency in the system. Rather they were simply saying that retirement
accounts work as advertised.

Just an odd takeaway, since that's the expressly stated purpose of most
retirement accounts. But fair enough.

~~~
bmcleod
The strange thing here is that retirement accounts with a tax deferment policy
benefit the higher earners much more than they benefit people in lower tax
brackets.

This isn't very consistent when the social issue that has really driven these
polices into existence is trying to convince lower earners to save for
retirement so that the state doesn't have a huge outgoing on pensions etc.

------
chime
I've used 50% as a conservative estimate for all my back-of-the-napkin
calculations for years and it has served me well, especially in consulting
projects. Sure I can lower that by showing expenses etc. but in the general
sense, if I charge $100/hour, what I'm really doing is enabling myself to
spend $50/hour in the future. The true benefit of this is that I don't have to
feel worried about over/under charging my clients.

~~~
bretthoerner
> The true benefit of this is that I don't have to feel worried about
> over/under charging my clients.

Why not? If you could (should) be charging $120 then that'd be $60 of future
spending.

~~~
chime
I charge $100 because I really feel the effort is worth $50 to me and the
client won't pay more than $100. Think of it this way: The lower bound is set
by how much I feel the effort is worth after taxes. The upper bound is set by
how much I think/know the client will pay. If half of the upper bound is less
than my lower bound, I don't do it. This way I don't under-charge.

By over-charge, I meant to say that even though I feel my effort is truly
worth $50 after taxes, I don't have to worry about charging $100, because I'm
not really over-charging the client since half of $100 is going to taxes.
Without taking 50% taxes into account (which is what a lot of people do),
asking $100 for something I truly feel is worth only $50 feels like
overcharging.

Over-charging new clients is never a personal issue because they can always
say no and walk away. But over-charging existing clients can cause you to lose
a steady stream of income, especially after you've invested time and effort to
establish a relationship and understanding of their needs.

------
leelin
Very cool, it seems the researchers took into account all sorts of things like
state sales tax, state income tax, corporate tax, welfare / handout type
programs, and spending + savings habits.

From what I can tell the key inflection points in the graph come from four
issues.

1.) How much can one contribute to retirement accounts to avoid paying income
tax that year?

2.) Where are the key discontinuous cutoff points in the tax system? (social
security maxes out, certain payments to the needy disappear, etc)

3.) What is the typical marginal propensity to consume?

4.) How much wealth has one accumulated by a certain age in life, which can be
invested, which is only taxed at lower capital gains / dividend rates?

My thoughts on the first are mixed. Yes, we don't pay taxes this year on money
we stash into a non-roth 401k, but I hope they aren't doing the bad accounting
of treating that as 0% tax... we will eventually pay SOME tax when we withdraw
on it, just not this year.

The second point is very valid... there is a magic range around $110-$160K
income right now where your marginal tax rate from paying social security is
almost 12% lower than the guys making $80K-$110K. In the US, you and your
employer each pay 6.2% of your earned income to social security, but it caps
at $110K (the rationale being you won't get credit for more than that at
retirement, so they won't take more).

The final points are a bit bogus in terms of providing us guidance, but they
are more of the author's observations from the data they studied. Poor people
consume more as a percentage of their income and hence pay more sales tax each
year. Wealthier people buy more, but less as a percentage of their income, so
they pay less sales tax, and save more over time which can be turned into
investment income.

[http://people.bu.edu/kotlikoff/Does%20It%20Pay%20to%20Work%2...](http://people.bu.edu/kotlikoff/Does%20It%20Pay%20to%20Work%20and%20Save,%20December%209,2006.pdf)

~~~
JoeAltmaier
Really rich people have little or no income. The dodge comes in taking your
jet, car, residence, living expenses etc as work expenses. While you OWN
billions, your income may be thousands.

~~~
byrneseyeview
If you own "billions," you presumably own equity or debt (maybe some
commodities, but it's not likely). If you own debt, you're paying taxes on the
interest. If you own equity, the value of that equity is the net present value
of future cash flows--meaning it's 'taxed' at the rate at which corporations
are taxed.

In addition, spending a lot of money and then making it a 'work expense' still
requires lots of income. You can't effectively write off your limo charges
unless your income at least equals them.

And I don't know how common it is to treat a residence as a work expense.
There's a home office tax deduction, but that is a common audit flag.

~~~
smeatish
As a side note, one interesting difference between owning equities from a
company that you started versus that you purchased from savings is that your
work invested into the company is NOT taxed.

If you can create $100k of value a year in your own company or earn a salary
of $100k (which after taxes nets you only $60k that you can contribute to
purchasing assets), it will take you a lot longer to build up the value of
your assets. Of course, capital gains distributions from either asset are
taxed the same.

~~~
byrneseyeview
Your work is not normally taxed; your income is. If your company is worth
something, it's based on some kind of future earnings. And those future
earnings are taxed.

~~~
Retric
Consider two developers that make 100k per year before taxes and live off of
40k / year. Now assuming they work for each other they pay 100k and get 65k
after taxes, spend 40k and get to invest 15k which they spend on advertizing
for their company.

Now assume the work for themselves They pay they only need to live off of 40k
so they pay themselves 70k and get to invest 30k on advertizing without paying
taxes on that value. Note: numbers are not accurate but they do give context.
The idea, is companies can invest in future earns though things like
advertizing or R&D without paying taxes on the income uses to pay for that
advertizing.

Now you are supposed to pay yourselves market rate, but if you generate 300k
in value each year you don't need to pay yourself that money.

~~~
byrneseyeview
Right, if you invest that money, you will only realize the value through
dividends or selling a stake. And the value of that stake is once again based
on the NPV of future cash flows, which are taxed.

------
mixmax
If you think that's high you should be happy you don't live in Denmark.

 _"The large public sector (30% of the entire workforce on a full-time basis)
is financed by the world's highest taxes. A value added tax of 25% is levied
on the sale of most goods and services (including groceries). The income tax
in Denmark ranges from 42.9% to 63% progressively, levied on 4 out of 10 full-
time employees. Such high rates mean that 1,010,000 Danes before the end of
2008 (44% of all full-time employees) will be paying a marginal income tax of
63% and a combined marginal tax of 70.9% resulting warnings from organisations
such as the OECD"_

Oh and if you want to buy a car you'll be hit with a 180% taxation of your new
car on top of the 25% valueadded tax.

source:
[http://en.wikipedia.org/wiki/Economy_of_Denmark#Tax_Burden_a...](http://en.wikipedia.org/wiki/Economy_of_Denmark#Tax_Burden_and_employment)

~~~
_delirium
The people who _do_ live in Denmark seem pretty happy about doing so, though
([http://www.sciencedaily.com/releases/2006/11/061113093726.ht...](http://www.sciencedaily.com/releases/2006/11/061113093726.htm)).
One reason might be that they're fairly wealthy to begin with, so it's taking
a large percentage out of a large pie (Denmark's per-capita GDP is ~DKK
375,000 = ~$62,000). The social safety net is also rather strong as a result
of the government's large amount of income, and it's popular, partly because
nearly everyone uses parts of it--- free education, free adult education, free
health care, free child-care, pensions, job retraining, etc.

~~~
erikpukinskis
And interestingly their unemployment rate is lower than ours* (at least since
2004). Evidence that providing more government services doesn't lead to people
just sitting on their asses and cashing their welfare checks.

* [http://globaleconstats.com/wp/2009/08/25/the-unemployment-ra...](http://globaleconstats.com/wp/2009/08/25/the-unemployment-rate-in-norway-is-low/)

~~~
billswift
I bet that if you put 30% of Americans on the public payroll, our unemployment
rate would go way down too.

------
cperciva
Canada is quite similar: In 2006, from $14k up to $88k the combined Federal+BC
income taxes, payroll taxes, and sales tax credits worked out to a flat rate
of 26% plus or minus $250. (Above $88k the rate goes up, but mostly due to a
cap on the amount which can be "hidden" in retirement funds.)

Graduated tax rates plus low-income tax credits equals a flat tax.

~~~
btilly
Really? Effective US tax rates are about a third higher than Canadian rates?

I find that difficult to believe, but I'd be greatly amused if it was true.

~~~
cperciva
Well, it depends in part on what you include. The 26% I mentioned is for
income taxes, payroll taxes, and (income-based) sales tax credits; but
Canadians also have to pay a federal sales tax of 5% and provincial sales
taxes (typically around 7-8%) on most purchases.

I believe the total tax burden ends up being fairly similar between the US and
Canada -- while Canada spends far more (per capita) on social services and
health care, the US spends a similarly larger amount on the military.

~~~
patrickgzill
Canadians also pay much more for gasoline than Americans. Of course, not all
of this is in taxes.

To check this: find a "gas buddy" site for a place in Canada, then find one
for the nearest US city/town close to it (to control for price disparity due
to shipping).

Multiply cost per liter by 3.6 to get equivalent US Gallon; then adjust it by
current exchange rate.

Example: lowest for Vancouver, BC: <http://www.vancouvergasprices.com/> is
currently 106.9 per liter ($1.069 CAD) , times 3.6 = $3.85 CAD , about $3.66
per US Gallon in USD.

Closest city on the US side is Bellingham, WA, lowest price there is $2.82, or
about US $ 0.80 difference per gallon.

Assuming a fill-up is 12 gallons, that is ~$10 per tank difference.

~~~
frankus
Go down to Seattle and it's probably $2.50. We Bellinghamsters have been
getting screwed for years (at least relative to the Seattle metro area).

There's an odd effect where a high-price area spills over into the
neighbo(u)ring areas. I haven't quite figured out an explanation.

~~~
lazyjeff
I wish it was $2.50 in Seattle. I'd even be overjoyed to pay the Bellingham
price of $2.82. I paid $3.11 to $3.17 the last two times I filled up last
week.

~~~
jules
Don't complain. Here in the Netherlands it's around $7.6 per gallon.

~~~
ovi256
$6.31 is Paris at the cheapest ever station that I never heard of because it
must be so out of the way. $6.90 seems to be average.

Sure would love me some $3 gas.

------
dschobel
Someone enlighten me, how can the author talk about a marginal tax rate for
the entirety of ones income?

Isn't a marginal rate by definition the rate which applies to earnings above a
specific benchmark (thereby providing no disincentive to cross it)?

~~~
btilly
The author didn't do that. Instead he reported on research that found that the
effective marginal tax rate across a broad range of incomes and life
situations was generally close to 40%. So no matter what your income, your
marginal tax rate is probably close to 40%.

~~~
houseabsolute
To put it simply: if you earn a dollar more of income, about forty percent of
that dollar will end up going to the government.

~~~
brc
Or, in other words, in a 5 day week, Monday and Tuesday you work for the
government. Wednesday through Friday is for yourself.

~~~
houseabsolute
No, that's not right, because the dollars you are already earning might not be
taxed at the marginal rate.

------
scottkrager
I just hope that capital gains taxes stay reasonable. I think they provide a
large incentive for small companies to grow and NOT just be lifestyle
businesses.

------
akikuchi
This is one of the least enlightening articles I've seen in a long time. I
understand that it's a challenge to succinctly summarize a 73 page paper in
300 words, but here the author seems to be happy to use the paper's "findings"
to support a extremely simplified "fact" about the current tax system.

The numbers cited in the article are based on a wide collection of
parameters/assumptions, but that is ignored in the summary.

Interestingly, the paper on which the article is based was directly supported
by fairtax.org- an organization solely dedicated to a drastic restructuring of
the tax system.

The all in tax burden at different levels of income is a very interesting
concept to explore. But here it seems like both the journalist and the paper's
authors have addressed the issue with a bias which takes away from what could
otherwise be a very interesting subject.

------
cullenking
As a person who wants to pay as little tax as possible (until of course, they
start spending the tax money in ways that I see fit, which don't include
blowing things up), I have always been against the concept of a single
national sales tax, or a flat tax. However, more and more I am realizing that
the benefits of axing most of the IRS (wow, talk about administrative
overhead) would actually effectively lower everyones tax burden by several
percentage points. You can't dodge a sales tax aside from buying used (great
incentive to curb our plastic consumer culture), but the good might outweigh
my original objections. Let the states decide if they want to makeup the rest
with property or sales tax, and the simplified tax system results in huge
benefits.

~~~
Retric
_wow, talk about administrative overhead) would actually effectively lower
everyones tax burden by several percentage points._

??? Where is the savings? The IRS is a tiny fraction of US government
spending.

Edit: IRS $12.15 billion in 2010, total federal expenditures $3.552
_trillion_. So it's 1/3 of 1% of the federal budget.

~~~
buro9
You could always try the military... you've got one hell of an expensive lean,
mean fighting machine there. I'm pretty sure it would still be as good for
defence at a fraction of the cost.

~~~
Dove
Be careful with that. Warfighting is every bit as complex, technical and
dynamic a discipline as computers. Maybe more so. Do you have a developed
opinion on ballistic defense, our nuclear posture, our relative emphasis on
COIN vs. conventional warfare? No? Then you are in the position of an
executive eying the expensive IT department with a foggy notion that it could
get the job done for half the cost, without a clear idea of what a server is
or does or why the administrator is so dang expensive.

I recommend poking around the Quadrennial Defense Review site to get a primer
on the major issues. It's a report the DOD does every four years to evaluate
its priorities and capabilities, explain its budget, etc. There are lots of
executive reviews, intelligent and opinionated commentaries, that sort of
thing. <http://www.defense.gov/qdr/>

~~~
Retric
There is a huge gap between the US and the second best military in the world.
After a 15% cut in DoD budget we would still maintain that #1, so the real
question is how much of a lead do we need to feel safe? Must we be able to
crush #2 - 5 at the same time?

~~~
Dove
Well, it's not a horse race. It's not a question of being able to beat the
other guy, but of capability. It's not about who you can beat, but what you
can do. (Though the amusing answer to your last question is yes -- for many
recent years, the direction was that the military needed to be at a level to
prosecute two overseas wars while maintaining homeland defense).

One of the QDR review panels talked about current issues in defense. It's not
authoritative direction, but it does give a taste of how the military is about
more than just competing with the next peer. Here's what they had to say about
its goals:

    
    
      1. America has for most of the last century pursued 
      four enduring security interests:
    
        a. The defense of the American homeland
    
        b. Assured access to the sea, air, space, and 
        cyberspace
    
        c. The preservation of a favorable balance of power 
        across Eurasia that prevents authoritarian domination 
        of that region
    
        d. Providing for the global ―common good through 
        such actions as humanitarian aid, development 
        assistance, and disaster relief.
    
    
      2. Five key global trends face the nation as it seeks 
      to sustain its role as the leader of an international 
      system that protects the interests outlined above:
    
        a. Radical Islamist extremism and the threat of 
        terrorism
    
        b. The rise of new global great powers in Asia
    
        c. Continued struggle for power in the Persian Gulf 
        and the greater Middle East
    
        d. An accelerating global competition for resources
    
        e. Persistent problems from failed and failing states.
    
    
      3. These five key global trends have framed a range of  
      choices for the United States:
    
        a. These trends are likely to place an increased 
        demand on American "hard power" to preserve regional 
        balances; while diplomacy and development have 
        important roles to play, the world‘s first-order 
        concerns will continue to be security concerns.
    
        b. The various tools of "smart power" – diplomacy, 
        engagement, trade, targeted communications about 
        American ideals and intentions, development of 
        grassroots political and economic institutions – 
        will be increasingly necessary to protect America‘s 
        national interests.
    
        c. Today‘s world offers unique opportunities for 
        international cooperation, but the United States needs 
        to guide continued adaptation of existing international 
        institutions and alliances and to support development of 
        new institutions appropriate to the demands of the 21st 
        century. This will not happen without global confidence 
        in American leadership, its political, economic, and 
        military strength, and steadfast national purpose.
    
        d. Finally, America cannot abandon a leadership role in 
        support of its national interests. To do so will simply 
        lead to an increasingly unstable and unfriendly global 
        climate and eventually to conflicts America cannot 
        ignore, which we must then prosecute with limited 
        choices under unfavorable circumstances -- and with 
        stakes that are higher than anyone would like.
    

It's not a question of just saying, "Do the same job with less." The military
we have exists to do certain jobs and there are a lot of very smart people
interested in doing those jobs very efficiently. No, if you want a cheaper
military, you need to do less. You need to start picking goals to give up. If
you really wanted to pare the military down to just homeland defense, you
probably _could_ do that job with a lot less, but you wouldn't be able to
render humanitarian aid or make the world a safer place for everyone (us
included).

Here's another example of a policy goal not directly related to homeland
defense or beating someone else's military (This from the Nuclear Posture
report):

    
    
        Toward a World Free of Nuclear Weapons
    
        The long-term goal of U.S. policy is the complete 
        elimination of nuclear weapons. At this point,
        it is not clear when this goal can be achieved. 
        Pursuing these NPR recommendations will strengthen 
        the security of the United States and its allies and 
        partners and bring us significant steps closer to 
        the President’s vision of a world without nuclear 
        weapons.
    
        The conditions that would ultimately permit the 
        United States and others to give up their nuclear
        weapons without risking greater international 
        instability and insecurity are very demanding. 
        Among those are the resolution of regional disputes 
        that can motivate rival states to acquire and 
        maintain nuclear weapons, success in halting the    
        proliferation of nuclear weapons, much greater 
        transparency into the programs and capabilities of 
        key countries of concern, verification methods 
        and technologies capable of detecting violations of 
        disarmament obligations, and enforcement measures 
        strong and credible enough to deter such violations. 
        Clearly, such conditions do not exist today. But we 
        can – and must – work actively to create those 
        conditions.
    

Applying effort toward achieving those goals may require a larger or smarter
(more expensive) military. We do it, not because we want to beat China, but
because it's something we want to do and think is worth the cost.

------
run4yourlives
The main issue is that we're still taxing income, instead of taxing
consumption.

We (no matter the country) could save billions in administrative costs simply
by moving all tax to point of sale style VATs. (As a sidenote this does not
mean that something like the FairTax proposal is a good example of this
concept.)

~~~
Elite
I'm no fan of excessive taxing, but if you shifted the source of all current
tax revenue to consumption based transactions, this would cripple the poor and
middle class.

For much of the lower/middle class, a significant, sometimes 100% of their
income goes to consumption. For the wealthy, consumption as percent of income
can be very small.

~~~
run4yourlives
Your argument makes a major assumption: That this isn't already the case.

The current system is regressive in practice, though not in theory. If this
wasn't the case, Buffet wouldn't be paying 17%.

Spending 100%+ of your income on consumption can be the norm for lower income
earners, it is true. That does not extend however into 100%+ of income spent
on consumption that is required for basic sustainability, especially in rich
countries such as in North America or Europe.

There is no incentive under the current system for any income bracket to spend
within their own means, regardless of what those means may be. The high levels
of unsustainable personal debt illustrate this perfectly.

This results in overspending on "luxury" (i.e. not "required") goods - even by
the "poor". There are few incentives that encourage the poor to establish
wealth through savings. There is also no incentive in the system to have
individuals increase their income to match their spending, although that's
admittedly a much harder accomplishment.

With an income tax system that isn't perfectly flat, the problems you
highlight are simply hidden, if not encouraged. With a flat based taxed, they
are not, but it is regressive.

With a flat consumption based tax with a level of social control through
either personal spending exemptions or through item based exemptions (baby
food, for example) we could do a better job of managing the regressive nature
of tax systems in general than we do right now.

In addition, we expose basic economics to those who have difficulty
understanding the concept by providing strong incentives to build wealth and
consume less, regardless of income bracket. This is something we should do.

~~~
meric
Now, how about a progressive consumption tax? Impossible to implement, but
perfect for the situation you just described.

------
mcknz
It's not like the entire tax goes into a black hole -- it would be interesting
to see what the return is on the average tax rate: how much benefit is derived
from state, federal, and city services (roads, water, security, libraries,
parks) and benefits (unemployment, social security, disability).

~~~
randallsquared
_It's not like the entire tax goes into a black hole_

It's arguable that we'd be better off were that so... part of the tax burden
is all the people employed by those taxes who don't actually contribute
anything to society on net (that is, whose jobs wouldn't be done at all on the
free market)... in this way, taxes can have something like double their cost
in harm, potentially.

~~~
coreymull
Airlines wouldn't exist in the "free market". Are you arguing that air travel
has no net value?

~~~
influx
Citation needed, Southwest is quite profitable, can you explain what they are
getting in subsidies (I just may be unfamiliar with your argument).

~~~
coreymull
<http://hasbrouck.org/blog/archives/001001.html>

------
dotBen
In UK the income tax for high-rate earners (anyone earning about $70k) is 40%.
As in, that's what is reflected in your pay check.

Then you add on council tax _(equiv of state tax although it's calculated
based on value of house)_ , VAT _(sales tax, 17.5% moving to 20% next year)_ ,
property tax _(only at sale and if you own more than one)_ , and all the sin
taxes _(cigarettes and gas is WAY higher cos it's mostly tax)_.

I like living in California and America... the taxes are so low here!

 _(caveat: yes we get health care paid for in UK which I have to pay for
here)_

------
alok-g
If I buy something for $100, I would pay sales tax on it. But is that really
it for purchases? Isn't the government collecting taxes at several other
points as the good is being made and brought to market? Taxes on raw
materials, on components making the product, taxes on shipping, etc.

All in all, if I buy something for $100, how much is the tax collected by the
government (in addition to what is taken from my income leaving me this $100
to spend)? Is all of that taken into account in this report?

~~~
Elite
Sounds like an excellent thesis for an economics grad student.

I'd love to see this data in an easy to read format for a variety of goods and
industries

------
jeromec
Semi-related: Can someone explain to me California CRV on recyclable
containers? My understanding is that this is meant to encourage recycling, but
the deposit amount you pay at the store doesn't equal what you get when you
recycle your containers. I checked out the Wikipedia page, and it explains how
the "Redemption Value" has changed over the years. If you take one of those
large 2.5 Gallon containers of Arrowhead Water you are charged an additional
$.50 each! There is no way you get that much to recycle it. How many bottles
are sold annually in California? That looks like clear additional tax revenue.
To add insult to injury, you are charged sales tax on the CRV deposit!

<http://en.wikipedia.org/wiki/California_Redemption_Value>

~~~
_delirium
I believe the private recycling companies that operate the redemption centers
do get the full CRV, rather than the state keeping it (though the state keeps
the sales tax on the CRV). If you go as an individual to a recycling company
to return containers for a refund, they pay you less than the CRV, the
difference going to their costs and profit. Since it seems to not be a very
competitive market (recycling centers aren't really competing for your
business by offering higher redemption values), almost all of them pay the
minimum redemption value that CA law requires them to pay.

~~~
jeromec
Thanks for the explanation, but I don't think I feel better about it. If the
recycling center gets my deposit I'm wondering why they need it. I thought the
point of a recycling center was that the material they collect (aluminum,
plastic, paper etc.) is profitable to collect. The CRV is labeled as a
"deposit". To me that should be like a bank term, i.e., you can reclaim what
you leave initially. I'm at a loss to understand why this deposit is not fully
refunded (which would further encourage recycling!), or at least something
reasonable like say 75%.

~~~
_delirium
I think only aluminum is unquestionably profitable to collect; everything else
is marginal or a loss. But yeah, there does seem to be some bait-and-switch
here.

------
nck4222
Man, those percentages in the chart at the end are really whacky.

Someone making $75,000/year pays a higher % tax their entire life than someone
making $200,000/year? Someone making $20,000/year (at 30) pays almost twice
the % as someone making $50,000/year (at 30)?

That doesn't seem right.

~~~
ojbyrne
SS and FICA are very regressive. It's interesting that the lowest rates
roughly correspond with the median income - as if the rates were tailored to
get the lowest rates to the majority of the voters, while screwing
(relatively) much smaller groups at the ends of the scale.

~~~
mattmcknight
It's not so much regressive as it is "supposed" to be a penion insurance plan
separate from the rest of your taxes. There is a cap on benefits, so there's a
cap on what you contribute to it, not unlike the cap on contributions to a
401(k) or IRA.

Of course, we never got our lockbox so the upcoming generation of retirees
elected governments that spent that retirement money on other stuff now wants
to raise taxes so that the current young folks can pay for their
irresponsibility.

------
tomwalker
That is so low compared to the UK.

~~~
teamonkey
It's not. We British like to complain about being ripped off but we're better
off than we think. Having moved to Canada much more leaves my paycheck than it
would in the UK and, according to an online calculator, the same would be true
if I moved to the States.

The things that really hurt in the UK are things like power and fuel costs,
council taxes, and various other mortgage-related taxes. That's where I'm
really seeing the difference.

------
aasarava
Anyone know why there's such a big dip for 30yrs at $50K?

~~~
tibbon
I'm guessing they assume a 30-year old couple has purchased a house recently
(large mortgage interest deduction), and has student loans still (student loan
interest deduction up to 6K/year I think, which goes away after 80K or so.
IANAA).

Between those two things, plus the general tax benefits of being married (and
50K not being that much for two people imho) give them a low tax rate.

------
VladRussian
the true tax rate = total government spending divided by GDP.

This is why Republicans, who've historically increased government spending,
thus have increased real tax rate (while of course giving narrowly targeted
breaks to themselves)

------
jcgregorio
Seriously, a 2007 news article based on a 2006 unrefereed paper is on the
front page today?

