It's not that complicated. In order for you to have a 40% effective tax rate (including Federal, State, Local and FICA), assuming you ONLY took the standard deduction and you file single, you'd need an income of just over $450,000/year.
https://smartasset.com/taxes/income-taxes#VL01ZILZtI
That assumes you have 1 exception, no deductions for retirement (which would actually reduce your effective rate) and only taking the standard deduction (you can't get lower!)
In fact, if you want to tax EVERY POSSIBLE tax into account (sales, property, fuel, etc), you'd need to make $300,000/year to achieve a 40% effective tax rate across all taxes.
So either you make a mountain of money, you have a terrible accountant, or you are lying.
Every time someone take about simplifying the tax code, I bring it up. It will hurt me as well (I'm poor) but it is ok.
If you're in the tax bracket to pay 40%, I'd say I want to raise your taxes you pay but I also want to raise the taxes your overlords pay.
I want higher taxes so we can offer the same services to the wealthy that we offer to the poor. It is the right thing to do. We don't have too many wealthy people in this country. We should be able to include everyone. Can't afford to include people who make too much money? Too bad. The program can't exist.
I would want to create a consensus towards "no income checks". The government should not have any program that qualifies people based on income or assets. Be it Medicare, social security, or Medicaid, food stamps, college tuition, rent subsidies, school lunch or whatever. You should not be able to exclude anyone because they make too much money or have too much money.
Of course, economists will say this is stupid and inefficient and irrational but I say economists are not even people. Nobody is rational in the real world.
If you earn much more than that, generally companies find other ways to pay you (equity, deferred compensation, etc.) that have more administrative overhead, but less of a tax hit.
And yes, FICA is definitely a tax. A regressive one since the rate goes down the higher your income is, but it's still a tax.
Well yes, if you are in the top 1% of wage earners in the US your effective tax rate is going to be pretty high. In fact, you'll pay around $200,000 in taxes on that, give or take (if you live in a high-tax state like California). But that's literally affecting 1% of the population, and they're probably doing ok.
> If you earn much more than that, generally companies find other ways to pay you
Most companies give equity in the form of RSU's rather than options, so income taxes hit immediately upon vesting.
> And yes, FICA is definitely a tax.
Yes they are a payroll tax, but just "adding" them into your income taxes is extremely misleading. Income tax is just that. FICA is a payroll tax.
Incorrect.
The highest marginal rate kicks in, for married-filing-jointly, at just over $470K; the next highest at over $416K. You have to making close to $1M in taxable income for a married couple to be paying the top marginal rate on most of their income, and over $800K to paying at least the second-highest marginal rate on most of your income.
At $500K, you're just barely paying at least the third highest marginal rate on half your income.
So I call bullshit. Marginal income tax rates are always higher than effective income tax rates. The only way you are paying a 50% tax rate is if you pretend ALL of your income is taxed at the 43% I mentioned AND you count FICA as a tax.