7 ms·

What would you expect? If you live in a state like California and are in the highest tax bracket, your total tax rate (federal + state + local + various surtaxe

by dmk23 13y ago

What would you expect? If you live in a state like California and are in the highest tax bracket, your total tax rate (federal + state + local + various surtaxes) would be close to 60%. It is ludicrous to expect most people to just fork over such an outrageous percentage of their earnings without complain. No wonder the high-income individuals are fleeing high-tax states and "tax-the-rich" ideology is failing to fill the states' coffers. Raising taxes hurts poor people more than the rich. http://www.forbes.com/sites/trulia/2013/02/12/jobs-arent-leaving-california-for-texas-but-people-are/ http://www.forbes.com/sites/trulia/2013/02/12/jobs-arent-lea...

deleted 13y ago
[deleted]
- dmk23 13y ago
  Who are YOU to tell ME what I "need"? If you want to "collectively decide" how to "better use" MY money, I can just move it to a different jurisdiction and you'll get what you deserve - nothing. If the value of what your "collective decision" gives me for "60% tax bill" is not there, the money will rightfully leave. There is a great parable explaining how this works: http://danieljmitchell.wordpress.com/2012/03/18/the-tax-system-explained-in-beer/ http://danieljmitchell.wordpress.com/2012/03/18/the-tax-syst...
  - kevinchen 13y ago
    "In my explanations of the Laffer Curve" closes tab
  - throwaway2048 13y ago
    I'm sure public infrastructure, public schooling, police and fire departments, national defense, etc etc had absolutely nothing to do with your success, and society as a whole does not deserve a single cent back. "Fuck you, I got mine" at its finest.
    - tolmasky 13y ago
      > national defense Yup, definitely couldn't have gotten to where we are without that well-used defense budget in going to war with Iraq and having the NSA monitoring all our communications.
      - bsamuels 13y ago
        probably in a similar spot you would be in without computers or the internet, both of which were derived from defense spending.
  - yapcguy 13y ago
    Is it really 60% for residents of California? Excluding sales tax since that's consumption based and not income based, how much money would a person have to earn, and under what conditions, to hit a 60% marginal rate?
    - gamblor956 13y ago
      It's not possible to pay a 60% marginal rate in the US unless you're paying tax penalties for previous underpayments of taxes. CA and NY have the highest tax burdens, and the highest marginal rate you could theoretically get is only 55%. 39.6% federal rate plus the 13.3% CA state rate + 0.9% high-income Medicare tax = 53.8% rate on non-investment income. Since we're talking about marginal rates, you wouldn't include the FICA or payroll taxes, as these are capped at lower thresholds than the marginal rates. (The exception is the 0.9% high-income Medicare tax, which only applies to the highest bracket.) But since federal taxable income excludes state taxes, you can't actually combine the state and federal marginal rates; you get a meaningless number. Investment income is subject to lower rates. The federal rates vary from 0-28% depending on the type of investment and the tax bracket of the taxpayer. For example, lowest-bracket taxpayers have a 0% rate on investment income; highest-bracket taxpayers have a 20% rate on dividends and capital gains and pay 28% for income on collectibles.
  - brady747 13y ago
    Don't worry, you are not the problem...the problem is all these morally, self righteous people doing their best to abide by the intent of the tax code even when they think the system isn't fair (or well managed)....even though you have more control in what is 'collectively decided' then they do...
  - anigbrowl 13y ago
    Don't let the door hit you on the way out.
thenmar 13y ago
That's only outrageous to Americans who are used to bowing down before the wealthy and worshipping financial success as some sort of moral ideal.
- qwerta 13y ago
  I would call myself European hippie, but I find it outrageous as well.
guelo 13y ago
Get your facts straight before you go Galt. This story has nothing to do with state income taxes.
redwood 13y ago
Is it ludicrous to expect most people to do that, when most don't and aren't expected to? Most don't make much money at all. Many more make none at all. The reason the tax rate is high on the ultra-well-to-do is to help cover the rest.
superuser2 13y ago
Say your income is $406,750 (highest federal tax bracket for an individual). Federal income tax is $118,188.75. California income tax is $37,941.45. Effective tax rate is 38%. San Francisco could add 1.5% so now we're at around 40%. How are you getting to 60%?
- dmk23 13y ago
  Excellent question and here is the answer: http://www.cnbc.com/id/100398096 http://www.cnbc.com/id/100398096
  - smtddr 13y ago
    >>So the maximum Mickelson could pay in state and income taxes, payroll and other income-related taxes would be around 60 percent. But that rate is only if he did absolutely no tax planning or basic deductions. So it's absolute worse case scenario then. Reading the rest of the article, it sounds like he can get it to below 50% with some moderate effort. Since rich people can afford professional accountants, I conclude he actually could get it to below 50% if he wanted or his accountants could suggest some tax loophole in another state to get it below 50%.
    - dmk23 13y ago
      Sure, that's just the start. A further improvement could be to move from California to say Nevada and pay no state tax at all. The next step would be reorganizing the business structure to keep most income / assets in the offshore jurisdictions. So on, so on, so on... See, you are starting to justify cutting the tax rate from 60% to 50%, but why stop there? The problem is created by the government/public asking for 60% to begin with and creating the sticker shock.
      - gamblor956 13y ago
        1) Yes, but if you legally reside in California [edit] or continue to do business in California, you still owe California taxes. Indeed, California will treat you as having not actually left California--and the federal courts would agree with them. (These jurisdictional principles have basic tax law worldwide for more than a century.) If you don't pay your income taxes to the jurisdiction(s) in which it is owed, you've committed a felony, and you'll end up paying all of the taxes owed, plus penalties and penalty-rate interest. There's also the potential for jail time. 2) There are many tax-regimes that are specifically targeted to prevent the movement of business assets offshore. In the US, running afoul of these rules is a minimum of $10,000 per violation (depending on the circumstances, potentially meaning per asset), plus the possibility of criminal sanctions. Moreover, locating assets offshore doesn't eliminate tax jurisdiction--you still owe income taxes in the jurisdiction in which you earn the income. (Basic international tax law.) All you really accomplish is to make yourself subject to additional income taxes in another jurisdiction, and worse--you may have rendered yourself out of eligibility for tax treaties that would have eliminated the double taxation. 3) Stop spreading FUD. The government isn't asking for 60%. And that's besides the point. Before the Reagan "Revolution", the marginal rate was greater than 60%. Right now, taxes are at near-historical lows. If you would prefer not to pay taxes, you could always move to a zero-tax haven like Somalia. I hear it's a lovely place this time of year.
paul9290 13y ago
Indeed tax rates are out of control for those who work hard, smart and strive for a better life. When your making say 50k the amount of taxes they take from you is no sweat. Though when your hard work pays off and you start making six figures you wonder huh I'm not making six figures and wont see six figures in my pocket until I start making north of 160K a year. Ridiculous!
jandrewrogers 13y ago
It is bad, but not quite that bad. If you just look at taxes on wages for someone making $250k per year, you will pay about 40% in obvious taxes in California. There are sales and other taxes on top of this and some additional regulatory taxes as well. Since I have operated companies with substantial payrolls in California and therefore been privy to the cost details, I can say that the total outlay to various government authorities when a paycheck is cut can exceed the total value of the paycheck in California but not much beyond that; maybe 52% to government, 48% to the employee. In summary, you will only approach 60% if you include all possible taxes on the income including the spending of said income, which does not happen often in practice. Even in California, the worst case is closer to 50% if you manage your income reasonably well. This still adds up to a lot of money if you compare it to a state like Washington with similar software engineering wages and no income tax, since that adds up to tens of thousands of extra income.

by dmk23 13y ago

deleted 13y ago

[deleted]

dmk23 13y ago
Who are YOU to tell ME what I "need"? If you want to "collectively decide" how to "better use" MY money, I can just move it to a different jurisdiction and you'll get what you deserve - nothing. If the value of what your "collective decision" gives me for "60% tax bill" is not there, the money will rightfully leave. There is a great parable explaining how this works: http://danieljmitchell.wordpress.com/2012/03/18/the-tax-system-explained-in-beer/ http://danieljmitchell.wordpress.com/2012/03/18/the-tax-syst...
- kevinchen 13y ago
  "In my explanations of the Laffer Curve" closes tab
- throwaway2048 13y ago
  I'm sure public infrastructure, public schooling, police and fire departments, national defense, etc etc had absolutely nothing to do with your success, and society as a whole does not deserve a single cent back. "Fuck you, I got mine" at its finest.
  - tolmasky 13y ago
    > national defense Yup, definitely couldn't have gotten to where we are without that well-used defense budget in going to war with Iraq and having the NSA monitoring all our communications.
    - bsamuels 13y ago
      probably in a similar spot you would be in without computers or the internet, both of which were derived from defense spending.
- yapcguy 13y ago
  Is it really 60% for residents of California? Excluding sales tax since that's consumption based and not income based, how much money would a person have to earn, and under what conditions, to hit a 60% marginal rate?
  - gamblor956 13y ago
    It's not possible to pay a 60% marginal rate in the US unless you're paying tax penalties for previous underpayments of taxes. CA and NY have the highest tax burdens, and the highest marginal rate you could theoretically get is only 55%. 39.6% federal rate plus the 13.3% CA state rate + 0.9% high-income Medicare tax = 53.8% rate on non-investment income. Since we're talking about marginal rates, you wouldn't include the FICA or payroll taxes, as these are capped at lower thresholds than the marginal rates. (The exception is the 0.9% high-income Medicare tax, which only applies to the highest bracket.) But since federal taxable income excludes state taxes, you can't actually combine the state and federal marginal rates; you get a meaningless number. Investment income is subject to lower rates. The federal rates vary from 0-28% depending on the type of investment and the tax bracket of the taxpayer. For example, lowest-bracket taxpayers have a 0% rate on investment income; highest-bracket taxpayers have a 20% rate on dividends and capital gains and pay 28% for income on collectibles.
- brady747 13y ago
  Don't worry, you are not the problem...the problem is all these morally, self righteous people doing their best to abide by the intent of the tax code even when they think the system isn't fair (or well managed)....even though you have more control in what is 'collectively decided' then they do...
- anigbrowl 13y ago
  Don't let the door hit you on the way out.

thenmar 13y ago

That's only outrageous to Americans who are used to bowing down before the wealthy and worshipping financial success as some sort of moral ideal.

qwerta 13y ago
I would call myself European hippie, but I find it outrageous as well.

guelo 13y ago

Get your facts straight before you go Galt. This story has nothing to do with state income taxes.

redwood 13y ago

Is it ludicrous to expect most people to do that, when most don't and aren't expected to? Most don't make much money at all. Many more make none at all. The reason the tax rate is high on the ultra-well-to-do is to help cover the rest.

superuser2 13y ago

Say your income is $406,750 (highest federal tax bracket for an individual). Federal income tax is $118,188.75. California income tax is $37,941.45. Effective tax rate is 38%. San Francisco could add 1.5% so now we're at around 40%. How are you getting to 60%?

dmk23 13y ago
Excellent question and here is the answer: http://www.cnbc.com/id/100398096 http://www.cnbc.com/id/100398096
- smtddr 13y ago
  >>So the maximum Mickelson could pay in state and income taxes, payroll and other income-related taxes would be around 60 percent. But that rate is only if he did absolutely no tax planning or basic deductions. So it's absolute worse case scenario then. Reading the rest of the article, it sounds like he can get it to below 50% with some moderate effort. Since rich people can afford professional accountants, I conclude he actually could get it to below 50% if he wanted or his accountants could suggest some tax loophole in another state to get it below 50%.
  - dmk23 13y ago
    Sure, that's just the start. A further improvement could be to move from California to say Nevada and pay no state tax at all. The next step would be reorganizing the business structure to keep most income / assets in the offshore jurisdictions. So on, so on, so on... See, you are starting to justify cutting the tax rate from 60% to 50%, but why stop there? The problem is created by the government/public asking for 60% to begin with and creating the sticker shock.
    - gamblor956 13y ago
      1) Yes, but if you legally reside in California [edit] or continue to do business in California, you still owe California taxes. Indeed, California will treat you as having not actually left California--and the federal courts would agree with them. (These jurisdictional principles have basic tax law worldwide for more than a century.) If you don't pay your income taxes to the jurisdiction(s) in which it is owed, you've committed a felony, and you'll end up paying all of the taxes owed, plus penalties and penalty-rate interest. There's also the potential for jail time. 2) There are many tax-regimes that are specifically targeted to prevent the movement of business assets offshore. In the US, running afoul of these rules is a minimum of $10,000 per violation (depending on the circumstances, potentially meaning per asset), plus the possibility of criminal sanctions. Moreover, locating assets offshore doesn't eliminate tax jurisdiction--you still owe income taxes in the jurisdiction in which you earn the income. (Basic international tax law.) All you really accomplish is to make yourself subject to additional income taxes in another jurisdiction, and worse--you may have rendered yourself out of eligibility for tax treaties that would have eliminated the double taxation. 3) Stop spreading FUD. The government isn't asking for 60%. And that's besides the point. Before the Reagan "Revolution", the marginal rate was greater than 60%. Right now, taxes are at near-historical lows. If you would prefer not to pay taxes, you could always move to a zero-tax haven like Somalia. I hear it's a lovely place this time of year.

paul9290 13y ago

Indeed tax rates are out of control for those who work hard, smart and strive for a better life. When your making say 50k the amount of taxes they take from you is no sweat. Though when your hard work pays off and you start making six figures you wonder huh I'm not making six figures and wont see six figures in my pocket until I start making north of 160K a year. Ridiculous!

jandrewrogers 13y ago

It is bad, but not quite that bad. If you just look at taxes on wages for someone making $250k per year, you will pay about 40% in obvious taxes in California. There are sales and other taxes on top of this and some additional regulatory taxes as well. Since I have operated companies with substantial payrolls in California and therefore been privy to the cost details, I can say that the total outlay to various government authorities when a paycheck is cut can exceed the total value of the paycheck in California but not much beyond that; maybe 52% to government, 48% to the employee. In summary, you will only approach 60% if you include all possible taxes on the income including the spending of said income, which does not happen often in practice. Even in California, the worst case is closer to 50% if you manage your income reasonably well. This still adds up to a lot of money if you compare it to a state like Washington with similar software engineering wages and no income tax, since that adds up to tens of thousands of extra income.