Wednesday, April 15, 2009

Tax Day

Cullen Hightower once said, "There's always somebody who is paid too much, and taxed too little -- and it's always somebody else."

Here's a chart that I made that graphs tax rates as a percentage of income versus income (up to $500k).
The red line is the federal income tax rate. The blue line is the rate for the sum of the federal income tax plus the Social Security tax (6.2% of up to $102k in income) plus the Medicare tax (1.45% of up to $102k in income) plus the employer's half of SS and FICA (7.65% of up to $102k in income). In other words, the red line is the tax rate for what is officially called the "income tax," and the blue line is the tax rate for actual tax based on income, excluding capital gains. Neither line takes into account deductions, loopholes, and cheats.

3 comments:

L said...

Not that I really understand this graph anyway, but I think you used "red" instead of "blue" in your graph description. If my brain was functioning properly, I may have taken the time to figure out which was which on my own. Instead I'll just continue to provide you with unnecessary critique.

amckenny said...

It would be interesting to see what happens if you include AMT in the blue line as well. I believe this will show a reversal of the downward sloping blue line after $102K/annum.

Anonymous said...

Glad I cheat