>Interesting Tax Data

>I found this gem at one of my favorite sources of tax data, the Tax Policy Center.

It’s a table that illustrates the effect of the 2001-2003 tax cuts pretty clearly. For the top 400 taxpayers in the US (these are folks making more than $10,000,000 per year, the average tax rate for the median high income taxpayer went from the 25-30% range under the Clinton administration to the 15-20% range under Bush.

For a couple who makes substantially less than the top 400 (say $150K), but make most of their money from wages, you typically pay about 14% in overall income taxes, then additionally you’re going to pay 12.5% in payroll taxes. Only when you get down to the 0% bracket are you paying less than 15% overall. I would guess these guys are mostly exempt from payroll taxes for two reasons:

1. According to other charts on the site, more than 50% of their income is from Capital Gains and Dividends at a 15% Income tax rate with no payroll tax, and
2. The Payroll tax cuts off at an income of about $100,000, and further wages are tax free.

I think this is fundamentally unfair and I believe that not only should the cap on payroll tax be lifted, but the Capital Gains and Dividends tax rates should be raised by about 5%. Unlike the Democratic presidential candidates, I don’t recommend any new spending based on the new revenue, the tax revenue should be devoted to reducing the deficit. And to avoid being called a hypocrite, both of those proposals would result in higher taxes for Wife and I, but I think the long-term health of the economy depends on us getting deficits under control.

Advertisements

About perkinsms

I'm an engineer and father interested in transit, parking and economics.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s