patrick.net

I would say show me your 1040. It's possible. If you trip AMT it's 26% then 28%. With a state tax like CA top rate of 12%, plus 15.3% FICA for self employed added in It's possible. But it would take a really bad accountant to actually pay 50 or 60%. Anyone smart enough to earn that kind of money should certainly be smart enough to minimize their taxes.

How can someone have a couple of jobs and a sole proprietorship and be in a very high tax bracket?

That's what I'm saying too. They claimed 2-3 jobs and small biz, but if they were in that high of a wage, their % on FICA would be very low, as it is regressive.

I suspect most add in their top marginal rate as what they think they pay.

Aside from AMT, it seems nearly impossible. Do we know how many taxpayers pay over 50% in total taxes?

Thanks!

I'd say they need to find some tax shelters, LOL.

When I was working in the bay area I was paying 40% easily.

Put somebody at the FICA cap $118,500:

They're grossing nearly $10,000/mo but paying:

20% federal income tax ($2000)
7% state income tax ($670)
12% SSA ($1200 -- employer pays half but it all comes out of the workers' checks)
3% Medicare ($300, ditto)

There a 40% marginal rate right there before the effects of 401ks and IRAs kick in.

Somebody with a $400,000 house, if such a thing existed in the bay area any more, would be paying another 3% ($300/mo) on the 1.2% property tax (27% MID taken).

California sales tax is 8% so they'd need to spend their entire gross on taxable stuff to get to 50% marginal rate tho.

Sole proprietors making six figures really need to max out all the retirement savings accounts they can.

Bellingham Bill says

Put somebody at the FICA cap $118,500:

They're grossing nearly $10,000/mo but paying:

20% federal income tax ($2000)

7% state income tax ($670)

12% SSA ($1200 -- employer pays half but it all comes out of the workers' checks)

3% Medicare ($300, ditto)

There a 40% marginal rate right there before the effects of 401ks and IRAs kick in.

At 118k you are well below amt so state income tax, interest on mortgage, and property taxes are deductible against federal taxes.

yeah my above is garbled a bit. I discounted the 1.2% property tax by the 27% marginal rate -- that's not the MID.

MID on a $400,000 loan at 3.5% would be another 3% ($300/mo) deduction.

The state income tax deduction is just a 20% rate reduction essentially, knocking it from 7% to 5.6%

So . . . 20% Fed + 5.6% State + 15% FICA + 3% property tax - 3% MID = 38% tax rate.

High-tax arguers are certainly better off leaving real property ownership out of the discussion since real estate is a great tax shelter.

bob2356 says

At 118k you are well below amt so state income tax, interest on mortgage, and property taxes are deductible against federal taxes.

That's what I was thinking too. And don't most taxpayers pay far less than 20% FIT? Thought the effective rate was closer to 10%?

And can't you deduct sales tax, if it exceeds your other deductions and have receipts?

By the way, these people I'm confident aren't wealthy, and live in Indiana.