Effective tax rate

[jIM_Ohio]

Originally Posted by jc3900

Please, look at some of the posts above. The "effective" rates that you guys are using don't include all of the taxes that you are paying. What about sales, property, state, medicare, and social security. The average rate that is paid by americans is 34%. That means if you are on the wealthy side, you are most likely paying higher than 34%. These numbers in the teens actually make me want to live in the United States, to bad they are false.

That average is greatly skewed. 75% of all americans earn in 15% federal tax bracket or lower. Even if you are at top of 15% tax bracket, you are paying much less than 15% tax bracket because of the standard deduction and the fact that there is a 10% bracket for first amount of income under around 10k.

A foreigner critizing the US's tax system holds little water. Yes there are other taxes we pay, some of which are accounted for in effective tax rate. My 8% effective tax rate takes into account payroll taxes and property taxes, but does not take into account consumption based taxes.

[Joan.of.the.Arch]

They aren't false, jc3900. They are answering with regard to federal income tax, clearly the original topic of the thread. I understand you are wanting to make us aware that we pay more taxes than just federal income taxes, but I believe we are already aware of that. It is still interesting to see responses to the original question.

Debbie, I don't think most USA homeowners get to deduct mortgage interest, either. One third of homeowners have no mortgage, so of course no interest to deduct. Another portion have interest amounts low enough never be deductible. This is my case, due to taking only a small loan in the first place. Another portion may pay enough interest to be deductible in the early years of ownership, but lose that deduction in later years.

Aleta, someone *ahem* mentioned gasoline taxes.

[jc3900]

I just get so heated about the tax issue because virtually 80% of your tax dollars are going to waste. All the money that you fork over goes to pay interest on the debt, doomed entitlement programs, and an overextended military.

[DebbieL]

Well, I don't think there's actually any government that gets it right or will please everybody. We all pay our taxes anyways - what else are you going to do? In Canada, we do feel we are heavily taxed, but there aren't too many places I would rather live than in Canada or the USA based on general standard of living.

[Aleta]

Well, almost everybody pays taxes. The underground economy doesn't. This is one reason why Fair Tax would be useful to make sure that everyone pays taxes. It would be one way to flush the money out and possibly help with the tax situation.

[sweeps]

Originally Posted by Aleta

Well, almost everybody pays taxes. The underground economy doesn't. This is one reason why Fair Tax would be useful to make sure that everyone pays taxes. It would be one way to flush the money out and possibly help with the tax situation.

People who want to cheat the system find a way. How long do you think it would take people to set up black markets to avoid paying huge sales taxes?

Plus as this article points out, are you ready to pay 23% sales taxes (that's just federal, not counting state and local taxes) on legal fees, rent for apartments, health care expenses, taxi cab rides, haircuts, and lots of other services? A lot of people will do what it takes to avoid that tax.

[LivingAlmostLarge]

Heck no. The fair tax is a terrible idea. It will hurt the poorer people who use more of their income to live for sure.

[jc3900]

Here is a brilliant idea that I credit to myself, how about less taxes. In my capitalistic eutopia, there would be no taxes on savings/investment and the average effective tax rate would be about 90 percent less than its current value. Our country would also be on a gold standard, thus creating a long term inflation of 0%. There would be so much propserity that people would be jumping out of buildings because they didn't know what to do with all of their excess cash and stock market gains from the never ending bull run.

To bad our country is made up of evil politicians and retarded citizens. Most likely our country will end up in a socialist pit where individual responsibility is not needed and everyone depends on big daddy government.

[DebbieL]

There is a happy medium in there somewhere I'm sure.

[moneybags]

Originally Posted by zetta

AGI $168k
Federal: 12.5%
CA state: 4.8%

If I had stayed a SAHM instead of working part-time for six months:
AGI: $151k
Federal: 8.7%
CA state: 4.3%

Just goes to show what life is like in the phase-out zone!

We are in a similar situation. DH makes most of the money. I work PT, so I figure all my earnings are taxed at our highest rate. Have you thought about routing your earnings into a 401K, Simple, or something similar if available? I put 100% of my earnings into a Simple until it's maxed out (then I get a few paychecks at the end of the year). It makes me feel better not paying all those taxes at the higher tax rate.

[jIM_Ohio]

Originally Posted by jc3900

Here is a brilliant idea that I credit to myself, how about less taxes. In my capitalistic eutopia, there would be no taxes on savings/investment and the average effective tax rate would be about 90 percent less than its current value. Our country would also be on a gold standard, thus creating a long term inflation of 0%. There would be so much propserity that people would be jumping out of buildings because they didn't know what to do with all of their excess cash and stock market gains from the never ending bull run.

To bad our country is made up of evil politicians and retarded citizens. Most likely our country will end up in a socialist pit where individual responsibility is not needed and everyone depends on big daddy government.

gold standard=strong dollar or strong currency. Not a bad policy, but economic policy cannot be as simple as one paragraph. Strong dollar will hurt companies which export outside the US.

[jc3900]

Strong dollar will hurt companies which export outside the US.

Well, the other side of the coin is a weak dollar where imports go way up kind of like the situation we are in now where inflation starts to become a problem. Strong dollar will increase purchasing power for consumers and corporations. A strong dollar will also help tame inflation. I would say the good far outweigh the bad though.

[Daylily]

How's this:

Federal 21.5%
State 5.7%

It hurts not having children or an excessive mortgage. On the other hand..... it's nice not having children or an excessive mortgage.

[Slug]

Originally Posted by Aleta

Well, almost everybody pays taxes. The underground economy doesn't. This is one reason why Fair Tax would be useful to make sure that everyone pays taxes. It would be one way to flush the money out and possibly help with the tax situation.

Fairtax is now only 4k signatures shy of its 100k signature goal to take their petition to congress.

Also, someone noted it as a potential attack on the poor. It is not due to pre-bate clauses. Look it up.

[brig2221]

Wow, I kind of feel like a chump here, looking at all of the effective tax rates.

My wife and I filed jointly, and Turbotax told me that I had an effective tax rate of 18 or 19% I believe, and I still owed another $1100!!!

I'm not complaining as we both did very well last year, and had our highest combined income since we have been married.

Paying more taxes isn't fun by any means. That said, the flipside is that you earned a higher income though too.

[all4money]

Ours is 5.62% ... not so bad.

[Daylily]

Still trying to figure out how you all get these LOW effective tax rates.

[Spud]

Just so I'm clear -- effective tax rate is Total Tax Paid divided by Total Income? If so, we're at 15%. Adding in property tax, sales tax, etc. raises that number to 21.6%. If you include Social Security & Medicare, it lands at 23%.

I feel sufficiently taxed.

[LivingAlmostLarge]

Max out 401k, use the flex medical spending, child care account for tax free deductions, then pay tuition for graduate school for Lifetime learning credit and/or tuition deduction, High property taxes, high state income taxes, and large mortgage deduction = super low taxable income, while gross income is large.

[MonkeyMama]

Originally Posted by Daylily

Still trying to figure out how you all get these LOW effective tax rates.

I blogged about this the other day because I am tired of people telling me I must be cheating to pay so little in tax. LOL. If you want to look at the gory details on my blog...

In short: The combo of kids, mortgage, high state taxes and high medical expenses does it for me. (Even without a mortgage we'd be in itemizing territory with our state taxes & medical expenses).

Being married also means we are taxed less on one income than a single person would be (at the same income).

Of course, in past years our tax rates were 0%. We weren't making near as much but still had all the deductions. Our first $50k income (approximately) is income-tax-free with our $37k or so of deductions, and 2 child tax credits.