stats45
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Post by stats45 on Apr 24, 2011 17:03:38 GMT -5
Total effective tax rates start to level off after $100,000 because you have hit your maximum SS payroll tax and you are only paying increased marginal personal income tax rates depending on your bracket and Medicare taxes (1.45%) on all earned income. Someone making $30,000 pays 7.65% of their income in payroll taxes while someone who makes over $1 million a year pays under 2% of their income in payroll taxes.
The effective tax rate for the high earners in the building is brought down because of tax deductions, and hopefully simplification in the tax code will help make the marginal and effective tax rates clearer and less relient on jumping through whatever hoops the government thinks are important at the time.
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rovo
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Post by rovo on Apr 24, 2011 19:17:51 GMT -5
As Martin A. Sullivan of Tax.com recently calculated, a New York janitor making slightly more than $33,000 a year pays an effective tax rate of nearly 25%. And the effective tax rate for a resident of the Park Avenue building named after Helmsley, earning an average of $1.2 million annually? A cool 14.7%. motherjones.com/files/images/helmsley.pngSo, if we consider payroll taxes the janitor pays about 25% or $8,250 and the up-scale guy pays a cool 14.7% or $176,400. And your point is?
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lurkyloo
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Post by lurkyloo on Apr 24, 2011 19:35:38 GMT -5
How does the number for payroll taxes get that high? At 7.65%, SS & Medicare should be $2530--where's the rest come from?
I'm actually okay with deductions to some extent because they help account for differences in cost of living, which can be extreme.
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SVT
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Post by SVT on Apr 24, 2011 19:50:53 GMT -5
What's your point??
What's 14.7% of $1.4M??
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Post by gsbrq on Apr 24, 2011 19:57:23 GMT -5
They're including the employer's portion of Med & SS tax in that number. Of course, the payroll taxes for 2011 are less than that b/c of the temporary decrease on the employee portion of FICA.
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SVT
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Post by SVT on Apr 24, 2011 20:03:17 GMT -5
Horatio, do you agree with the links? LOL I assume yes.
How about you share some of your thoughts and what not when posting part of an article and links. In one forum I frequent, doing what you did is not allowed. It's sort of annoying.
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lurkyloo
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Post by lurkyloo on Apr 24, 2011 20:58:33 GMT -5
Good grief. How many NYC janitors are self-employed? Without detailed explanations of where these numbers come from, I see no reason to believe them.
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dancinmama
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Post by dancinmama on Apr 24, 2011 21:00:43 GMT -5
As Martin A. Sullivan of Tax.com recently calculated, a New York janitor making slightly more than $33,000 a year pays an effective tax rate of nearly 25%. And the effective tax rate for a resident of the Park Avenue building named after Helmsley, earning an average of $1.2 million annually? A cool 14.7%. motherjones.com/files/images/helmsley.pngThis is extremely misleading. The effective tax rate for an individual is the ratio of taxes paid to adjusted gross income. The employee pays only half the payroll taxes depicted in the chart; their employer pays the other half. If you take out what is paid by the employer, the REAL effective tax rate for the janitor ends up being around 17% and the REAL effective tax rate for the millionaire ends up being around 14% which is not nearly the disparity shown in the chart. Many naive people will take the chart at face value instead of delving into it a little deeper. This is the exact thing that will continue to fuel a class war in this country which is completely unproductive.
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Post by ty on Apr 24, 2011 21:08:42 GMT -5
As Martin A. Sullivan of Tax.com recently calculated, a New York janitor making slightly more than $33,000 a year pays an effective tax rate of nearly 25%. And the effective tax rate for a resident of the Park Avenue building named after Helmsley, earning an average of $1.2 million annually? A cool 14.7%. motherjones.com/files/images/helmsley.pngIt's more like the people are jut being taxed to death on everything. They take taxes out of your pay, then you pay taxes in the stores, gas stations, home owner taxes, taxes, taxes, taxes... and then our government wants more of your money. Maybe if we stopped sending billions of the people's tax dollars to foreigners every year, we would be able to lower taxes and do more for America and the American people. One day, people will go to work and then start handing over their already taxed pay to the government. The people are becoming their slaves all over again.
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ameiko
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Post by ameiko on Apr 24, 2011 21:09:04 GMT -5
So basically they should just take the cap off of Social Security. No problem! At least until you start sending out SS checks for 50K to Tiger Woods when he retires...
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Deleted
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Post by Deleted on Apr 24, 2011 21:58:43 GMT -5
So basically they should just take the cap off of Social Security. No problem! At least until you start sending out SS checks for 50K to Tiger Woods when he retires... We do we have a cap anyway?
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cronewitch
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Post by cronewitch on Apr 24, 2011 22:34:15 GMT -5
The cap is because people earning more than that don't need as much social security insurance. Right now the poor get back a higher percentage of average wages than the middle class and it is capped before they must pay huge monthly payments to the high earners.
If we removed the cap so someone making 200K paid twice what someone making 100K paid we would need to increase the benefits by the same ratio. The poor would throw fits if they got $1,200 and the middle class got 1,800 the rich got 3,500 and the highest earners got over 7K a month even if they paid in much more in a lifetime.
Also the high earners might not have started earning high wages in their 20's because of more years of education so the highest 35 years could have some with nothing so allowing them to uncap would mean the averages could go way up.
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lurkyloo
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Post by lurkyloo on Apr 24, 2011 22:45:26 GMT -5
Nice summary(smackdown), dancinmama--karma to you! I suspect that the imaginary numbers shown in the figures are also derived from the 1.2M-earner getting a significant chunk of that from capital gains, which are taxed at 15% and not subject to SS or (at the moment) Medicare. It's hard to say, since we have no details whatsoever DH and I are part of that higher tax bracket generally accepted as scum, and our ratio is well over the imaginary janitor's miscalculated ratio much less the imaginary millionaire.
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❤ mollymouser ❤
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Post by ❤ mollymouser ❤ on Apr 24, 2011 23:38:23 GMT -5
The headline of this thread confuses me ... if payroll taxes counted as taxes. Why wouldn't a tax count as a tax?
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Post by straydog on Apr 25, 2011 0:49:01 GMT -5
The headline of this thread confuses me ... if payroll taxes counted as taxes. Why wouldn't a tax count as a tax? Because alot of people who pay federal income taxes do not consider them to be taxes. I think that when most people say 'tax' they mean federal income tax, not payroll taxes. Article: "Nearly 50% will pay no Federal Income Tax for 2009" www.cbsnews.com/stories/2010/04/07/national/main6372418.shtmlIMHO, the current tax code should be scrapped altogether in favor of the Fair tax, the Flat tax, or tariffs on imports. The current tax code just promotes class warfare and bad feelings on both sides.
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stats45
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Post by stats45 on Apr 25, 2011 1:35:29 GMT -5
Most households pay more in payroll taxes then in personal income taxes. I guess this is part of the point of the OP. We don't always acknowledge that many people are paying these taxes when we hear the '__________ percent of people pay no taxes' news stories.
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973beachbum
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Post by 973beachbum on Apr 25, 2011 8:02:23 GMT -5
How does the number for payroll taxes get that high? At 7.65%, SS & Medicare should be $2530--where's the rest come from? I'm actually okay with deductions to some extent because they help account for differences in cost of living, which can be extreme. I don't think that's it. NYC has it's own payroll tax/income tax. It is actually pretty onerous. Phila has one too. DH worked in Phila one year and the Phila payroll tax ended up being more than we paid to the State of NJ, which we live in, and the Fed Gov combined.
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formerexpat
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Post by formerexpat on Apr 25, 2011 8:23:36 GMT -5
As we've already covered here on these boards; the janitor would benefit disproportionately when he received his deferred annuity from the government, compared to the residents of the building.
This graphic also includes the employer paid payroll tax of 7.65% for the janitor. Is that how we're calculating it now? If so, then shouldn't that amount also be considered compensation [i.e. his income is $35.6k, not $33.1k]?
If that's the case then it appears the Helmsley graphic is incorrect. $106.8k x 12.4% [employee + employer] = $13.2k Add in an additional 2.9% for Medicare on just $106.8k = $3.1k; and Medicare tax is unlimited.
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formerexpat
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Post by formerexpat on Apr 25, 2011 8:26:39 GMT -5
No, not really.
The total compensation of the janitor from the company's point of view is $35.6k [plus any value of other benefits, if they exist] and that is the market rate. If the tax were just paid by the employee, the company would be able to pay the janitor more.
So, when you look at the taxes you pay, include the employer half of SS/Medicare in your compensation and in your tax bill to see how much more you are paying in taxes.
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formerexpat
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Post by formerexpat on Apr 25, 2011 8:28:46 GMT -5
Because these are premiums to the state forced deferred annuity / medical care program that the poor disproportionately benefit from compared to the better off. This system is built as a back door welfare program for retirees.
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973beachbum
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Post by 973beachbum on Apr 25, 2011 8:30:01 GMT -5
It is the 3.5%+ NYC payroll tax that is the difference NOT the employer portion.
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formerexpat
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Post by formerexpat on Apr 25, 2011 8:46:18 GMT -5
$33,080 x 7.65% = $2,530.62
$2,530.62 x 2 = $5,061.24
Graphic = $5,062.
The NYC tax rate is also 2.907% for income under $12k for single; so the effective NYC tax rate on $33k of income would be approx 3.3%. Your guess would still leave 4+% unaccounted for. I'm going to go with my guess that is within $1 of the graphic unless you can come up with another 4+%.
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jkapp
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Post by jkapp on Apr 25, 2011 10:55:49 GMT -5
Do property taxes also get counted as taxes??? Can we get some total tax rates with those included?
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formerexpat
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Post by formerexpat on Apr 25, 2011 11:18:08 GMT -5
Don't forget the taxes that customers indirectly on goods that they purchase from the very companies they vilify.
It's funny that people yell and complain that "companies" don't pay enough in taxes, not realizing that any taxes they do pay are entirely passed on to the consumer.
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hoops902
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Post by hoops902 on Apr 25, 2011 11:28:38 GMT -5
Don't forget the taxes that customers indirectly on goods that they purchase from the very companies they vilify. It's funny that people yell and complain that "companies" don't pay enough in taxes, not realizing that any taxes they do pay are entirely passed on to the consumer. So then you think if companies paid 0% in taxes they'd just slash the prices on everything they sold? Or you think they'd keep charging the same prices and pocket the profit?
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jkapp
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Post by jkapp on Apr 25, 2011 12:07:40 GMT -5
Don't forget the taxes that customers indirectly on goods that they purchase from the very companies they vilify. It's funny that people yell and complain that "companies" don't pay enough in taxes, not realizing that any taxes they do pay are entirely passed on to the consumer. So then you think if companies paid 0% in taxes they'd just slash the prices on everything they sold? Or you think they'd keep charging the same prices and pocket the profit? Of course, stating companies pay 0% in taxes is the same as saying 47% of people pay no taxes...
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phil5185
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Post by phil5185 on Apr 25, 2011 12:21:13 GMT -5
So then you think if companies paid 0% in taxes they'd just slash the prices on everything they sold? Or you think they'd keep charging the same prices and pocket the profit? They would do the latter - they have to. First, one company that sees an opportunity to take more of the market away from his competition will slash his prices (and still operate profitably at higher volume). That results in a price-war and the entire sector falls in line to meet the competition (or they will lose their customers and go out of business). So, probably within 6 months of the 'zero tax law' the market will reach equilibrium, the customers will receive the tax break, and businesses will go back to operating at a normal 8% to 12% margin (same as before the law).
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formerexpat
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Post by formerexpat on Apr 25, 2011 14:28:56 GMT -5
To hoops question, what Phil said.
Investors expect a certain return for the risk they are taking. Unless you can prevent your competitors from decreasing prices to take market share, yes, prices will / would decrease.
The real question is by how much. How much are corporate taxes baked into product costs.
Lets look at a hypothetical [maybe not so much] situation of McDonalds:
The beef company wants a 33% profit on a product that costs $0.15 to make, so they sell it to McDonalds for $0.30 and their income statement for a single beef patty looks like this:
sale of patty - $0.30 patty cost - ($0.15) pre tax profit - $0.15 taxes - ($0.05) after tax profit - $0.10, margin after tax of 33%
McDonalds operates on a 45% margin and sell that hamburger for $1.00 [ignore bun cost]:
$1.00 sale of burger ($0.30) cost of patty $0.70 profit before tax ($0.24) tax on sale of burger $0.46 profit after tax, 46% after tax margin.
So, the consumer in this example paid $0.29 in taxes, or 29% BEFORE including sales tax on the item purchased OR the various income and payroll taxes that the consumer paid on his income [i.e. double taxation].
Why not eliminate corporate taxes and have McDonalds sell that patty for $0.71 and then have a national sales tax of 25% [or 23%] instead of corporate taxes? You're still paying it, but you'd be well aware and therefore [in theory] hold your politicians accountable.
Even if you decreased corporate taxes to just 10% or something like that, it would have a huge impact on the investment in this country. When Bush floored the profit repatriation to 5%, there was a flood of money that came back into the states. What if we made that our normal policy and actually invested in our futures?
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stats45
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Post by stats45 on Apr 25, 2011 14:32:10 GMT -5
I agree with you Horatio that all taxes should be looked at, however, there are still some considerations that are important when comparing payroll taxes and income taxes.
With payroll taxes, most low-income and middle-income households receive benefits equal to their contributions through Social Security and Medicare. Though there is intragovernmental borrowing, the overwhelming majority of monies collected result in forced savings for retirement health and pension programs. Higher earners get less of their monies back relative to their expenditures than lower earners.
Income taxes are different to many people because many low-income and middle-income families receive very generous credits and benefits even with no positive tax expenditures. Many people are concerned that this system encourages a disconnect between the taxes paid for services and the people who are likely to use them. Certainly the same happens with SS and Medicare, but it is not as stark, and in the case of SS at least, money paid in is related to benefits received.
The other main political difference is that government expenditures on Social Security and Medicare (and the amount paid in payroll taxes) are relatively popular. People are happy with the programs, even to the point of ignoring serious fiscal problems with the two programs. Expenditures for the rest of the government are not viewed as favorably.
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hoops902
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Post by hoops902 on Apr 25, 2011 14:41:08 GMT -5
"Why not eliminate corporate taxes and have McDonalds sell that patty for $0.71 and then have a national sales tax of 25% [or 23%] instead of corporate taxes? You're still paying it, but you'd be well aware and therefore [in theory] hold your politicians accountable."
The question is though, do you think McDonald's really moves to having the $.71 menu? Or do they keep it the dollar menu?
If what Phil said were true (it's good in economic theory, it's just not true in the real world), then we would already have these price wars everywhere as companies tried to undercut one another. Based on the economic theory Phil put forth, if you had a 12% profit margin, and had a 5% market share...you'd move down in price to a 10% margin for a 10% share, then you'd move down to a 1% margin for a 100% share...until everyone was at a 1% margin just to hold their share. The reason is doesn't happen is because heads of corporations understand the end-game it leads to.
"Investors expect a certain return for the risk they are taking. Unless you can prevent your competitors from decreasing prices to take market share, yes, prices will / would decrease."
It would be prevented the same way price wars are prevented now...the competing companies understand that moving from a new 20% profit margin back down to an 8% margin means everyone eventually keeps the same market share with lower margins. It won't move from 20 to 8 for the same reasons it doesn't move from 8 to 1 now.
Prices will drop in the same industries that already operate on razor thin margins due to price competition. In other areas it won't make a bit of difference other than to increase corporate profits (which isn't necessarily bad, it's just not the massive price cuts people seem to assume).
Do you really think McDonald's prices all of their products the way you describe in your example? Not everything on the $1 menu has the same cost, pricing has other factors to consider more than just cost to manufacture. The $1 items aren't going to become the $.71 menu. So now you're paying $1 plus the 25% tax.
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