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View Diary: No country for Zuckerbergs (193 comments)

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  •  I would be surprised if the top effective (0+ / 0-)

    rate was anywhere near that low in states with relatively high income taxes, except possibly for the ultra-rich.  

    •  The best state-by-state (8+ / 0-)

      analysis of state and local tax burden is the Who Pays? series.  It's just not that high, even in the highest-tax states (the federal offset is a big help for the wealthiest taxpayers).

      The best estimates I've seen of the total burden are here (link to PDF in the first sentence).

      In Rand McNally, they wear hats on their feet, and hamburgers eat people!

      by cardinal on Sun Oct 03, 2010 at 08:36:46 AM PDT

      [ Parent ]

      •  A quick calculation of effective rate (2+ / 0-)
        Recommended by:
        billmosby, Balto

        Assume a married couple making $800,000 living in NYC.  Both work and all income is from wages.

        They currently face an effective federal income tax rate of 31.29% (from 2010 IRS tax tables).  They face an effective social security tax rate of 1.66% and an effective medicare tax rate of 1.76%. This means that the total federal tax rate they face is 34.7%.  

        The effective state and local income tax rate (from NYS and NYC tax tables) is 7.8% for the state and 3.62% for the city for a total of 11.42% in state and local income taxes.  

        Because these taxes are deductible for federal tax purposes, the effective federal and local rate needs to be reduced by the effective federal income tax rate.  Doing so reduces the state effective rate to 5.36% and the city to 2.39% for a grand total effective tax rate of 42.55%.

        42.55% is way more than 30%.  This ignores a number of items, but the biggest are sales and property taxes which would boost the rate by several percentage points.  

        (I have ignored a number of things in doing this.  Among other things: the deductibility of state and local taxes is limited, thus increasing the effective tax rate; there are personal exemptions which would reduce the effective tax rate; there are sales and property taxes which would increase the tax burden; I have assumed no other itemized deductions which would reduce the tax burden;  non-wage income such as interest would reduce the effective tax rate slightly.  None of these change the point that this hypothetical couple is already paying an effective tax rate of over 40% and with the increase of the federal income tax rate back to 1990s levels would be approaching a rate of 45%, before sales and property taxes.)

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