Thursday, February 24, 2011

Strange facts about taxes

From Catherine Rampell:
The table below shows the total income and payroll tax liability of a typical resident of the Helmsley building, alongside the same tax liabilities of janitors and security guards earning the average wages for the jobs in the New York area.
DESCRIPTIONMartin A. Sullivan
As you can see, the average effective income and payroll tax rate for individuals filing from the Helmsley Building was 14.7 percent of their adjusted gross income. By contrast, the income tax rates for the typical New York janitor and security guard were 24.9 percent and 23.8 percent, respectively.
I guess this might explain some of the anger from the middle class about taxes.  Most people don't see the Employer portion of the payroll tax, but the point is the payroll tax is regressive and is actually targeted at Social Security and Medicare, where people are now looking to cut to balance the budget.  Needless to say, a person in the building could be receiving $5,000,000 in dividend income, and it would only be taxed at 15%, whereas, a person making $300,000 in salary would be paying at a 35% marginal rate on the top portion of that income.  Makes a lot of sense to me.

2 comments:

  1. So, if I can make five million a year then my tax rate will go down? Why do I feel violated from both ends?

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  2. Only if you get paid, but don't have to do any work.

    ReplyDelete