There is a myth that somehow Americans are undertaxed. Besides the philosophical points about the government's claim to the work of the people, many people seem to forget the 15-plus percentage point payroll taxes and state taxes. I'll take California, my home state, as an example. California has a progressive income tax that ramps up very quickly (the top 9.3% bracket is hit as early as $38,291). Below are two quick and dirty income tax schedules (they don't include things like the standard deduction or personal exemptions because I'm lazy right now). In red are where there are periods of inversion of the generally progressive system. Notice how they fall right on the middle class. Think of taxes like a hill. Is there any wonder why people have a hard time breaking over the hump?
On the left: Federal Income, Social Security (FICA), and Medicare Taxes (FICA is 12.4% including both employee and employer portions on an $87,000 base and Medicare is 2.9% again including both sides but on the entire salary).
On the right: Federal Plus California Income and Disability Taxes (CA disability is 0.9% on a $56,916 base).
base | rate |
$0 | 25.3% |
$7,000 | 30.3% |
$28,400 | 40.3% |
$68,800 | 43.3% |
$87,000 | 30.9% |
$143,500 | 35.9% |
$311,950 | 37.9% |
| |
base | rate |
$0 | 27.2% |
$5,834 | 28.2% |
$7,000 | 33.2% |
$13,829 | 35.2% |
$21,826 | 37.2% |
$28,400 | 47.2% |
$30,298 | 49.2% |
$38,291 | 50.5% |
$56,916 | 49.6% |
$68,800 | 52.6% |
$87,000 | 40.2% |
$143,500 | 45.2% |
$311,950 | 47.2% |
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