A 62% Top Tax Rate?

[I AM NOT THAT GUY 5,715]

Democrats have said they only intend to restore the tax rates that existed during the Clinton years. In reality they're proposing rates like those under President Carter.

Media reports in recent weeks say that Senate Democrats are considering a 3% surtax on income over $1 million to raise federal revenues. This would come on top of the higher income tax rates that President Obama has already proposed through the cancellation of the Bush era tax-rate reductions.

If the Democrats' millionaire surtax were to happen—and were added to other tax increases already enacted last year and other leading tax hike ideas on the table this year—this could leave the U.S. with a combined federal and state top tax rate on earnings of 62%. That's more than double the highest federal marginal rate of 28% when President Reagan left office in 1989. Welcome back to the 1970s.

Here's the math behind that depressing calculation. Today's top federal income tax rate is 35%. Almost all Democrats in Washington want to repeal the Bush tax cuts on those who make more than $250,000 and phase out certain deductions, so the effective income tax rate would rise to about 41.5%. The 3% millionaire surtax raises that rate to 44.5%.

But payroll taxes, which are income taxes on wages and salaries, must also be included in the equation. So we have to add about 2.5 percentage points for the payroll tax for Medicare (employee and employer share after business deductions), which was applied to all income without a ceiling in 1993 as part of the Clinton tax hike. I am including in this analysis the employer share of all payroll taxes because it is a direct tax on a worker's salary and most economists agree that though employers are responsible for collecting this tax, it is ultimately borne by the employee. That brings the tax rate to 47%.

Then last year, as part of the down payment for ObamaCare, Congress snuck in an extra 0.9% Medicare surtax on "high-income earners," meaning any individual earning more than $200,000 or couples earning more than $250,000. This brings the total tax rate to 47.9%.

But that's not all. Several weeks ago, Mr. Obama raised the possibility of eliminating the income ceiling on the Social Security tax, now capped at $106,800 of earnings a year. (Never mind that the program was designed to operate as an insurance system, with each individual's payment tied to the benefits paid out at retirement.) Subjecting all wage and salary income to Social Security taxes would add roughly 10.1 percentage points to the top tax rate. This takes the grand total tax rate on each additional dollar earned in America to about 58%.

Then we have to factor in state income taxes, which on average add after the deductions from the federal income tax roughly another four percentage points to the tax burden. So now on average we are at a tax rate of close to 62%.

Democrats have repeatedly stated they only intend to restore the tax rates that existed during the Clinton years. But after all these taxes on the "rich," we're headed back to the taxes that prevailed under Jimmy Carter, when the highest tax rate was 70%.

http://online.wsj.com/article/SB10001424052702304066504576343611464445594.html

[luckytxn 2,264]

Confiscate all their income. When small businesses shut down and throw out most of all the jobs in the country then we can invade Canada and take their wealth and after that Europe and so on. We don't need small businesses.

[Mr. Big Dog 10,747]

My goodness. What a flawed comparison. Take only the top marginal tax rate under Reagan and compare it to any and all taxes levied today - including FICA and state and local income tax rates. This makes the comparison dishonest just on the surface. Because, taking all the tax rates into the calculus would have forced Murdoch's puppets to reveal the tax hikes that Reagan undertook on the FICA taxes which, due to the cap on SS taxes hit the low and middle income earners the hardest. SS and Medicare taxes were 8.1% when Reagan took office. They were 15.02% when he left. And yes, the cap was raised as well. These taxes - taking both the rate and cap into account more than doubled over The Gipper's two terms. State and local income taxes, of course, didn't exist then or have we just conveniently forgotten about them when talking about the tax rates when The Gipper left? What a load of #######!

Edited May 28, 2011 by Mr. Big Dog

[Vi-Jay 218]

Some people really, I mean really, need "fair" comparisons, sometimes.

Edited May 28, 2011 by Vi-Jay

[Vi-Jay 218]

Wait, Wait wait

This one fits better.

http://www.youtube.com/watch?v=tA65N1MFUdY&NR=1

[Usui Takumi 1,562]

Confiscate all their income. When small businesses shut down and throw out most of all the jobs in the country then we can invade Canada and take their wealth and after that Europe and so on. We don't need small businesses.

What did small businesses do between 1941 and the 1970s? It seems to me that small businesses only began to suffer after this period of higher taxes.

Edited May 28, 2011 by Sousuke

[Vi-Jay 218]

What did small businesses do between 1941 and the 1970s? It seems to me that small businesses only began to suffer after this period of higher taxes.

Are you trying to be objective?

[Usui Takumi 1,562]

Are you trying to be objective?

Explain

[Vi-Jay 218]

Explain

Long or short?

[Usui Takumi 1,562]

Long or short?

lol, I guess short.

[Vi-Jay 218]

lol, I guess short.

Hmmmm, I give you, middle.

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[Vi-Jay 218]

What did small businesses do between 1941 and the 1970s? It seems to me that small businesses only began to suffer after this period of higher taxes.

Objectivity is priceless.

[Xinh_Will 1]

We did pretty dadgum well with high historical top rates, as a nation and as individual families. See the twenty years after WWII, just as a fer instance.

And we had small businesses the whole time--buncha fearmongering, this-IMHO.

Historical rates (married couples, filing jointly)

Table

Tax year Top marginal

tax rate (%) Top marginal

tax rate (%) on

earned income,

if different<1> Taxable

income over--

1913 7 500,000

1914 7 500,000

1915 7 500,000

1916 15 2,000,000

1917 67 2,000,000

1918 77 1,000,000

1919 73 1,000,000

1920 73 1,000,000

1921 73 1,000,000

1922 58 200,000

1923 43.5 200,000

1924 46 500,000

1925 25 100,000

1926 25 100,000

1927 25 100,000

1928 25 100,000

1929 24 100,000

1930 25 100,000

1931 25 100,000

1932 63 1,000,000

1933 63 1,000,000

1934 63 1,000,000

1935 63 1,000,000

1936 79 5,000,000

1937 79 5,000,000

1938 79 5,000,000

1939 79 5,000,000

1940 81.1 5,000,000

1941 81 5,000,000

1942 88 200,000

1943 88 200,000

1944 94 <2> 200,000

1945 94 <2> 200,000

1946 86.45 <3> 200,000

1947 86.45 <3> 200,000

1948 82.13 <4> 400,000

1949 82.13 <4> 400,000

1950 84.36 400,000

1951 91 <5> 400,000

1952 92 <6> 400,000

1953 92 <6> 400,000

1954 91 <7> 400,000

1955 91 <7> 400,000

1956 91 <7> 400,000

1957 91 <7> 400,000

1958 91 <7> 400,000

1959 91 <7> 400,000

1960 91 <7> 400,000

1961 91 <7> 400,000

1962 91 <7> 400,000

1963 91 <7> 400,000

1964 77 400,000

1965 70 200,000

1966 70 200,000

1967 70 200,000

1968 75.25 200,000

1969 77 200,000

1970 71.75 200,000

1971 70 60 200,000

1972 70 50 200,000

1973 70 50 200,000

1974 70 50 200,000

1975 70 50 200,000

1976 70 50 200,000

1977 70 50 203,200

1978 70 50 203,200

1979 70 50 215,400

1980 70 50 215,400

1981 69.125 50 215,400

1982 50 85,600

1983 50 109,400

1984 50 162,400

1985 50 169,020

1986 50 175,250

1987 38.5 90,000

1988 28 <8> 29,750 <8>

1989 28 <8> 30,950 <8>

1990 28 <8> 32,450 <8>

1991 31 82,150

1992 31 86,500

1993 39.6 89,150

1994 39.6 250,000

1995 39.6 256,500

1996 39.6 263,750

1997 39.6 271,050

1998 39.6 278,450

1999 39.6 283,150

2000 39.6 288,350

2001 39.1 297,350

2002 38.6 307,050

2003 35 311,950

[Vi-Jay 218]

Am I correct when I guess, higher tax brackets would not affect you?

Edited May 28, 2011 by Vi-Jay

[ready4ONE 5,400]

Assuming the OP was correct, but of course it was a hack pile of manure, but for giggles sake, I would laugh all the way to the bank with my post tax earnings. Three hundred and eighty grand isn't exactly hardship.