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Federal taxes ain't that progressive.
Social Security and Medicare are net reducers of poverty and beneficial to our economy. ALL individuals, rather than only employees should more fully contribute to funding those programs.
Working-poor are not required to file income tax returns; but all wage earners pay FICA taxes upon their annual wages “capped” at $127,200 and 1.45% on the remainder of their wages.
Various classifications of incomes, (but not wages), are subject to no income tax or taxed at more favorable than regular income tax rates.
Consider the FICA payroll tax and the Republican's current income tax reform proposal of 3 tax brackets for regular incomes. The middle income bracket is a 25% regular tax rate. (Republican leadership have not yet published their proposed range of taxable incomes subject to the 25% regular income bracket). The other 2 brackets are 12% and 35% regular tax rates.
Regular income brackets' rates are the least favorable income tax rates. There are many exceptions, inclusions and waivers, justified and unjustified “loop holes” in our existing and proposed tax regulations granting specific sources and taxpayers with greater favor. We've always had “special strokes for special folks”.
All wages are subject to FICA payroll taxes. The employees' annual wages “capped” at $127,200 pay 7.65% FICA, and they pay 1.45% FICA upon annual wages greater than that cap. The majority of middle and lower income earners derive the majority of their incomes from wages; statistically, lower income earners derive almost their entire incomes from wages and the working poor derive their entire earned incomes from wages.
Tax payers in the highest income bracket will be subject to to federal tax taxes ranging from zero to statically less than effectively 35% of their adjusted gross incomes.
Middle income earners will be subject to federal taxes ranging from zero to less than 25% of their adjusted gross earnings; but if they're wage earners, they're subject to 7.65% to less than 32.65% of their entire wages.
Lower income earners will be subject to federal taxes ranging from zero to less than 12% of their adjusted gross earnings; but if they're wage earners, they're statistically subject to 7.65% to less than 19.65% of their entire wages.
The working-poor are statistically all wage earners subject to 7.65%of their entire earned incomes.
The “progressive” federal income taxes ain't that much progressive as compared between middle and high income earners. It's being proposed that progressive income tax rates become even less of a reality and more of a mirage.
The FICA tax is the most regressive federal tax which when combined with the less progressive income taxes, are regressive when applied to the working poor.
Especially when tax "exclusions" (e.g. employer-paid health insurance), deductions, and other breaks are considered.
They are progressive above ~$100k (esp above the FICA cap) and below about $15k (childless) / $30k (with children) and not especially progressive in between.
The people who get the hard screwing are the 1099 contractors who make about $125K. They're paying both sides of payroll taxes and they have a bunch of 28% bracket income. They're not showing business income so they can't write off health insurance.
The people who get the hard screwing are the 1099 contractors who make about $125K. They're paying both sides of payroll taxes and they have a bunch of 28% bracket income. They're not showing business income so they can't write off health insurance.
If they aren't showing business income, why are they paying self-employment tax?
To be fair on the 1099s their income is often higher because of that designation, at least that's how it was in the software development industry where I spent my career. A company might have average software dev salary of $110k but have contractors in there making $75/hour for same work, who really makes more depends on a lot of factors including (lack of) benefits and how much value you place on job stability.
I'm really curious where these proposed brackets are going to fall, both sides can talk all they want about who is going to save/lose what but in the end we have no idea on hard numbers other than the doubling of the std deduction.
The people who get the hard screwing are the 1099 contractors who make about $125K. They're paying both sides of payroll taxes and they have a bunch of 28% bracket income. They're not showing business income so they can't write off health insurance.
GeoffD, we, (you, FreeMkt, and I) apparently concur, federal taxe's aint that progressive.
In 2012, both Romney and Obama paid an effective tax rate of 12%. My 25-year old daughter paid an effective tax rate of 25%.
So NO...Federal taxes are not progressive thanks to the capital gains rate. There are some deductions and loopholes that two multi-millionaires payed 12%.
It will be interesting if Trump ends up making the Federal income tax progressive.
Generally, in 2016 and 2017 taxpayers are allowed to deduct personal exemptions of $4,050 for themselves, their spouses and their dependents. In addition, taxpayers are allowed a standard deduction or, if their deductions are large, they can itemize their deductions. .
However, the personal exemptions and itemized deductions for higher income taxpayers are phased out beginning when a taxpayer’s adjusted gross income (AGI) reaches a phase-out threshold amount.
The threshold amounts are based on the taxpayers’ filing statuses and for 2017 are: $261,500 (up from $259,400 for 2016) for single filers, $287,650 (up from $285,350 for 2016) for individuals filing as heads of households, $313,800 (up from $311,300 for 2016) for married couples filing jointly and $156,900 (up from $155,650 for 2016)
Business expenses are not. Capital gains rate remains at 23%.
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