AMERICAN CONSERVATISM IN 2008 AND BEYOND

They have had enough of Obama's proposed tax hikes and tax "surcharges" to pay for all his spending programs that will drive U.S. tax rates higher even than the welfare-state economies of Europe (New Yorkers, for instance, could face a combined federal-state income tax rate of nearly 60 percent)

The real kicker, though, is that Senator Obama would end the Social Security payroll tax cap for those over $250,000 in earnings. (The cap is currently set at $102,000.) These individuals will then face a tax rate of 15.65 percent from payroll taxes and the top income tax rate of 39.6 percent for a combined top rate of over 56 percent on each additional dollar earned.

High-income individuals will be forced to pay even more if they live in cities or states with high taxes such as New York City, California, or Maryland. These unlucky people would pay over two-thirds of each new dollar in earnings to the federal government.

Barack Obama’s new tax rate would give the United States one of the highest tax rates among developed countries. Currently only six of the top 30 industrial nations have a tax rate for all levels of government combined of over 55 percent.

Your marginal tax rate " including federal, state, and local income taxes and federal payroll and self-employment taxes " is the percentage that will come off the top of your next dollar of incremental taxable income. Put another way, the percentage of that next dollar of income that you'll actually be allowed to keep is 100% minus your marginal tax rate.

Unfortunately when you earn a healthy income, the federal component of your marginal rate is almost guaranteed to be higher than advertised because of so-called phase-out rules that reduce or eliminate various tax breaks. For example, your 2009 itemized deductions begin to be partially phased out (reduced) when your adjusted gross income (AGI) tops $166,800. If you are affected by this rule, you probably think you're in the 28%, 33%, or 35% bracket. But your real marginal rate is higher than the stated percentage, because your itemized deductions gradually evaporate as you move up the income ladder.

In estimating your marginal rate, our calculator takes this phase-out rule and several others into account. So don't be shocked if the rate that pops out of this calculator is quite a bit higher than you expected. (It's a dirty little secret the politicians would prefer to keep under wraps.)
http://www.smartmoney.com/Personal-Finance/Taxes/Whats-Your-Marginal-Tax-Rate-9546/

Fox is ignoring the "income tax" statement as much as she is ignoring me.

Someone else is going to have to point out the simple math to her.



You can't add ALL of FICA to the income tax a person pays UNLESS you are also going to add it to their income. Otherwise you end up with someone taking home 49% of the their income and paying 58% of it in taxes.

No one earns an income of 107% of their total income.

Except Julie Satow's piece makes many mistakes. As Joe pointed out she confuses marginal rates with effective rates. But she also is arguing that someone will pay a 55% tax rate while taking home 52% of their income. Only a complete fool or a liar would propose such a thing. Since Julie Satow is a journalist, we can assume she isn't a fool, don't you think?

For **** sake Foxfyre. you should be ashamed to try to teach us about taxes when you make the mistakes you are.

Okay let’s look at this as objectively as possible. First, we were not talking about corporate taxes, and even if we were, deductions are not tax credits. You do know the difference between those two things, yes? But let's not get sidetracked with that sort of thing.

I will concede that the ‘over 56%’ as described in her piece is incorrect. 15.65 + 39.6 is over 55.25 and not 56%.

Whether that was an addition error or typo, I can’t say nor can you, but the typo theory is plausible as she did use the 55% number a couple of paragraphs later within a context that suggests the 55% number was in her head: "Barack Obama’s new tax rate would give the United States one of the highest tax rates among developed countries. Currently only six of the top 30 industrial nations have a tax rate for all levels of government combined of over 55 percent."

In this same context, she also included awareness of higher than usual state and city taxes in some states which reinforced the original piece to which you took exception.

I am wondering if YOU understand marginal tax rates which is what both writers were addressing in this article.

The phase out of deductions is what will significantly increase that marginal tax rate and both writers were certainly aware of that.

Glad to hear that Parados is alive and well. But from what I've seen, it is extremely rare when he effectively rebuts anybody because he focuses on one or two words or unimportant issues and nitpicks them to death and doesn't put things into their proper context. He often doesn't even put his own argument into its proper context.

And yes, we know how some liberals are so envious of the rich that you can't wait until Obama makes them unrich. The way things are going, you just might see your hope fulfilled. And I don't think you will like the results.

Foxfyre wrote:

Okay let’s look at this as objectively as possible. First, we were not talking about corporate taxes, and even if we were, deductions are not tax credits. You do know the difference between those two things, yes? But let's not get sidetracked with that sort of thing.

Actually, I thought you were talking about corporate taxes, unless you file as a subchapter S corporation.

Foxfyre wrote:

I will concede that the ‘over 56%’ as described in her piece is incorrect. 15.65 + 39.6 is over 55.25 and not 56%.

Why would you add the total FICA rate when only half of it is paid by the employee?

Foxfyre wrote:

Whether that was an addition error or typo, I can’t say nor can you, but the typo theory is plausible as she did use the 55% number a couple of paragraphs later within a context that suggests the 55% number was in her head: "Barack Obama’s new tax rate would give the United States one of the highest tax rates among developed countries. Currently only six of the top 30 industrial nations have a tax rate for all levels of government combined of over 55 percent."

It wasn't her math that was the problem. It was her intentional blurring of the distinction between effective and marginal tax rates.

Foxfyre wrote:

In this same context, she also included awareness of higher than usual state and city taxes in some states which reinforced the original piece to which you took exception.

So what? The original piece got it wrong too.

Foxfyre wrote:

I am wondering if YOU understand marginal tax rates which is what both writers were addressing in this article.

This is rich. You agree with people who clearly don't understand the difference between effective and marginal rates, and then you presume to lecture me on the difference? Save your misinformation for someone who can truly appreciate it.

Foxfyre wrote:

The phase out of deductions is what will significantly increase that marginal tax rate and both writers were certainly aware of that.

And the hits just keep on coming! The phase-out of deductions will have no effect whatsoever on the marginal tax rate. That rate remains the same regardless of the number of deductions. You're thinking of the effective tax rate.

Oh, never mind. I don't know why I even bother.

Since you brought up the separate issue regarding social security, however, when I had employees and was paying half of their social security out of the business checkbook, they were still paying all or most of it. If I had not had that mandatory expense and they were paying all their own social security, their paycheck would have been more. So in a way, most employees are paying at least some if not all the portion of social security the employer is responsible for.

Nope. I didn't mention corporate taxes nor did either of the two writers we are discussing. So are YOU lying by referring to corporate taxes here? If we use your way of describing such, you could be accused of lying about the taxes they are referring to. Or perhaps we might be willing to keep things within their proper context here and debate the actual message.

A small business owner, such as myself, certainly regards them as such as estimated social security plus income on net earnings is combined and submitted on the same form every three months.

Nobody pays my half. I pay it all. Nobody pays El Stud's half. He pays it all. Neither writer was discussing employees either. Are you lying when you try to make this an employee issue when they weren't? Or perhaps we might be willing to keep things within their proper context and debate the actual message.

Since you brought up the separate issue regarding social security...

...when I had employees and was paying half of their social security out of the business checkbook, they were still paying all or most of it. If I had not had that mandatory expense and they were paying all their own social security, their paycheck would have been more. So in a way, most employees are paying at least some if not all the portion of social security the employer is responsible for.

What intentional blurring? I think both writers are specifically addressing the marginal tax rates.

In all due respect, you saying that does not make it so. I don't think you have made a credible rebuttal yet.

Me either when you obviously can't back up your own argument.

As most people know, state income taxes are deductible from federal income taxes.