Scott Burns - Marginal Tax Rate is 40%

[tryan]

Always thought I paid closer to half my earned income. SB says we pay closer to 40% ...

Either way ... too high ! IMHO

Boston University economists Laurence J. Kotlikoff and David Rapson have found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%.

http://articles.moneycentral.msn.com/Taxes/Advice/YourRealTaxRate40.aspx

[Moderator edit: added "Scott Burns" to title of post.]

 

[ziggy29]

Re: SB - Marginal Tax Rate is 40%

I think a lot of people just don't think about how many different ways they pay taxes.

People don't always think about the gas tax when they fill up. Or taxes on the bottle of wine or bottle of scotch they buy (above and beyond sales taxes). Or the employer portion of Social Security and Medicare taxes, which is effectively compensation you never see. Or the higher prices consumers pay on retail goods to cover taxes paid by the manufacturer, the retailer, and any middlemen.

When you think about it in those terms, the tax we pay is staggering. Politicians prefer their taxes hidden, anyway. They'd prefer that we think we're undertaxed, blissfully ignoring all the money we spend that is a stealth tax in reality.

 

[SecondCor521]

Re: SB - Marginal Tax Rate is 40%

Let's see if I can list a few:

federal income taxes
state income taxes for most of us
local/city income taxes for some of us
Social Security tax
Medicare tax
sales tax
property tax
automobile registration fee
fuel tax
govt subsidies to agriculture
cigarette tax for some of us
telephone taxes
airline arrival/departure and 9/11 security tax

I used to think my tax burden was too light, but after the divorce my tax burden has risen quite a bit.

2Cor521

 

[laurence]

Re: SB - Marginal Tax Rate is 40%

Didn't read the article, but if they are referring to the classic definition of marginal, that's the last dollar you earn. Your average tax rate is much lower than that. I figured my marginal to be a little higher than 40% but my average was way down in the low teens, if memory serves. Now I'll admit that didn't include the various forms of sales tax ( I'm lumping here because you don't pay phone tax on your gas bill, etc.). That's the amazing thing about taxed deffered accounts. We who can afford to use them actually get rewarded, and those who can't get punished further. When is "tax freedom day" nowadays?

 

[Empty Pockets]

Re: SB - Marginal Tax Rate is 40%

Marginal rate is impacted quite a bit if you've maxed out the SS tax.

Also, if you're not self employed your employer is matching your SS tax. Don't think you're not paying that too, the employer has it budgeted in the cost of hiring you.

 

[LOL!]

Re: SB - Marginal Tax Rate is 40%

This article was first published at Scott Burns' web site. One thing I noticed then is that there appeared to be the assumption that folks lived up to their means. That is, folks with larger incomes bought larger homes and thus paid more property taxes. Folks with larger incomes bought more expensive cars and thus paid more sales taxes. Etc.

But if you are saving 60% of your income because you LBYM, then it is hard to imagine that the other is taxed up to a marginal rate of 40% because that would leave you with almost nothing to pay for your food, clothing, transportation and shelter.

 

[TromboneAl]

Re: SB - Marginal Tax Rate is 40%

Another reason to LBYM.

BTW, SB=Scott Burns (took me a while).

This seems to be the paper the article is based on:

Comparing Average and Marginal Tax Rates under the FairTax and the Current System of Federal Taxation

 

[deserat]

Re: SB - Marginal Tax Rate is 40%

I'm not surprised at the amount of taxes I pay - in fact, my Quicken shows it as the largest expense I have.....I track sales tax, property tax, federal income tax, state income tax, Medicare and Social Security tax.....I don't track gas tax or excise taxes - however, they would just skew the tax burden into an even higher percentage of expense for me. What I find fascinating is when I compare what I get as a citizen for those taxes in the social realm versus what I was able to enjoy in Europe.....let's just say it's a lot less.

 

[tryan]

Was pleasantly surprised when I tax return came back from my accountant ... it seems that the child tax credit GWB put thru left me with a TAX REFUND even thou I did pay ANY federal tax!

Maybe this year I am a little below 40%. 8)