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Thread: Republican rebuttal to Kansas issue, please

  1. #16
    Quote Originally Posted by oski003 View Post
    Are you living in a make believe world where California doesn't take its cut? Is the ivory tower immune from state taxes?
    You know what - I made a mistake and need to apologize to Goobear. Though I still am skeptical he has clients paying over 50%, it is possible. I need to rephrase my post as follows:

    You probably don't. Statistically the highest possible is about 52% and that requires making millions of dollars. People who make millions of dollars typically have capital gains and dividend income which is taxed at 20% and 15% respectively, so virtually nobody pays above 50% average taxes and if they do, it likely won't be for very long as their asset base expands. I am always bothered when professionals casually throw out numbers that are nearly impossible.

  2. #17
    Quote Originally Posted by DangerBear View Post
    Max fed is 35%, max CA is 13.3. SS phases out well before then, Medicare is 1.x. Am I forgetting anything? Basically impossible to get over 50%
    I think you are mistaken on the highest federal tax bracket.

  3. #18
    I think DangerBear is closest to correct. Dajo, I don't see how you can get to 52% marginal unless you are choosing not to take any available deductions. And of course, that is assuming your income is 100% ordinary income which is atypical and means it's either a one-time deal - because you had an outsized stock option realization event or because you are choosing an unusual way to spend or use your extra millions.

    Even if you are paying 13.3% in California, your marginal federal tax rate drops to 34% because you are deducting your CA income tax on your federal return. And then you layer on the 2.35% for medicare. And that all assumes, your only deductions are for state income tax. So max in CA if you make infinite money, you are looking at just a hair under 50% (49.98% I think). Any other deductions you have would take that down lower.
    Last edited by Unit2Sucks; 06-15-2017 at 03:16 PM.

  4. #19
    Quote Originally Posted by Unit2Sucks View Post
    I think DangerBear is closest to correct. Dajo, I don't see how you can get to 52% marginal unless you are choosing not to take any available deductions. And of course, that is assuming your income is 100% ordinary income which is atypical and means it's either a one-time deal - because you had an outsized stock option realization event or because you are choosing an unusual way to spend or use your extra millions.

    Even if you are paying 13.3% in California, your marginal federal tax rate drops to 34% because you are deducting your CA income tax on your federal return. And then you layer on the 2.35% for medicare. And that all assumes, your only deductions are for state income tax. So max in CA if you make infinite money, you are looking at just a hair under 50% (49.98% I think). Any other deductions you have would take that down lower.
    It's probably somewhere around 50%. Prior to deductions, top marginal is 39.6 percent, correct?

  5. #20
    Quote Originally Posted by Unit2Sucks View Post
    I think DangerBear is closest to correct. Dajo, I don't see how you can get to 52% marginal unless you are choosing not to take any available deductions. And of course, that is assuming your income is 100% ordinary income which is atypical and means it's either a one-time deal - because you had an outsized stock option realization event or because you are choosing an unusual way to spend or use your extra millions.

    Even if you are paying 13.3% in California, your marginal federal tax rate drops to 34% because you are deducting your CA income tax on your federal return. And then you layer on the 2.35% for medicare. And that all assumes, your only deductions are for state income tax. So max in CA if you make infinite money, you are looking at just a hair under 50% (49.98% I think). Any other deductions you have would take that down lower.
    That would be great if the deductions were not phased out. The other deductions (such as mortgage) are not increased with additional incremental dollar so it doesn't reduce the tax rate that applies to each additional incremental dollar of income. So, 39.6 + 13.3 + 2.35 = 55.25. Even if you assumed that at least 20% of the state income tax is subject to deduction without being phased out (including by AMT), then it would still be 39.6 + 10.6 + 2.35 = 52.6

  6. #21
    Quote Originally Posted by calbear93 View Post
    That would be great if the deductions were not phased out. The other deductions (such as mortgage) are not increased with additional incremental dollar so it doesn't reduce the tax rate that applies to each additional incremental dollar of income. So, 39.6 + 13.3 + 2.35 = 55.25. Even if you assumed that at least 20% of the state income tax is subject to deduction without being phased out (including by AMT), then it would still be 39.6 + 10.6 + 2.35 = 52.6
    I believe you are correct. The Medicare rate could go up further if one was self employed as well. That being said if anyone told me they were paying over 50% of their earnings to taxes I'd recommend they find a new financial planner.
    Strongly abides by the motto: "safety third"

  7. #22
    Quote Originally Posted by DangerBear View Post
    That being said if anyone told me they were paying over 50% of their earnings to taxes I'd recommend they find a new financial planner.
    +1

  8. #23
    Forgot about Pease. Not sure how AMT would hit someone like this though since this type of taxpayer would be paying so much in the standard tax system.

  9. #24
    Quote Originally Posted by dajo9 View Post
    You know what - I made a mistake and need to apologize to Goobear. Though I still am skeptical he has clients paying over 50%, it is possible. I need to rephrase my post as follows:

    You probably don't. Statistically the highest possible is about 52% and that requires making millions of dollars. People who make millions of dollars typically have capital gains and dividend income which is taxed at 20% and 15% respectively, so virtually nobody pays above 50% average taxes and if they do, it likely won't be for very long as their asset base expands. I am always bothered when professionals casually throw out numbers that are nearly impossible.
    Dajo, appreciate your honesty. I am talking about people with mostly business income who have S Corps and LLc's. Nothing for a financial planner to do there....



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