How much money do you need to make to spend

[raulus]

Originally Posted by ValKehl

Nicolo, I don't comprehend how your or anyone's "average" tax rate can be 55%. The highest incremental federal income tax rate is 37%. Even with adding the highest incremental state income tax rate, one is at less than 50%. One's average tax rate is going to be less than the highest incremental tax rate.

You’re off to a good start. But you’re missing a few bits:

Self employment tax (yep, I’m self employed)
County tax for the homeless
Local tax for preschool for all
Property tax
Bonus Medicare tax

37% for fed plus 10% for state gets you a large way there, even if some of the federal income is taxed at a lower rate. Add in some of these bonus bits and you get over 50% pretty fast.

Luckily, I live in a zero sales tax state, or that could be added to the list to boot.

And if you want to get extra excited, I’ve got phantom income due to being a partner in a partnership. A portion of my share of the partnership’s taxable income gets reinvested back into the business. So I get to pay tax on it, but I get zero cash for that income. So that raises the effective tax rate on my total cash compensation.