Removing the cap increases the total marginal tax rate for the people impacted by the cap increase so saying your not increasing the rate makes no sense.
If we increase the cap from $118K to $150K, people making $150K will pay another $2K per year (6.2% on the $32K diff.)
No you have to double that. If their self employed they write the check for the employer side as well, even if their not it impacts their wages.
These people already pay a lot more of their income in taxes than other people.
Lets say you have a self employed person in New York City paying the top rates - (self employed so he actually writes the check for both sides of the payroll tax, employees get just as impacted by the "employers portion", but I don't want to complicate the example with that argument right now)
If you remove the cap or raise it to a very large extent the marginal tax rate for this person is -
39.6% federal income tax. 4.8% Medicare, 12.4% percent social security, .6% net federal unemployment tax, 9.62% percent state income tax but its deductible against federal tax so the net figure is 60.4% of that or about 5.81% percent, 3.88% city income tax rate but its also deductible so .234% - Total of over 75%
That's not including New York State unemployment taxes because I couldn't figure out the actual rate labor.ny.gov indicates 1.7% to 9.5%, that's a pretty broad range. It would bring the total up to about 77% to almost 85%
And that's before considering that anything he spends on what's left over also gets the state and city sales tax, which is a combined 8.875%.
Pretty confiscatory.
Rates from
adp.com (note you have to double all the payroll rates (except the .9% extra Medicare payment) the figures are for the employee and the employer the self employed person is both)
taxfoundation.org
and
www1.nyc.gov
Yes the rich have a lot of money, even the non-super rich like the example above (top federal rate kicks in at $415,050 for the individuals, $466,950 for couples filing jointly, top New York state tax rate kicks in at just over a million, but if you only make enough to barely qualify for the top federal rate you pay only 1.97% percent less, and effectively only 1.19 percent less after you account for the deduction of state income taxes).
So if we follow your idea a couple running a business in NYC making $470k could pay as much as over 80% of their income taken out up front, plus 8.85 percent sales tax on what they buy, plus various business taxes and fees and inspection charges, plus real estate tax etc...
OK you were only going to increase it to $150k, the results there would not be quite as crazy, but also wouldn't be enough to cover entitlements.
Instead of getting a marginal tax rate (not counting sales, business taxes, real estate taxes etc.) of 70 to 80 something percent they only pay 43.3 federal income and payroll taxes, plus 4 percent state, plus 3.648% city taxes. I'll assume they are not the owners of a company employing themselves or anyone else so you can drop the unemployment taxes, also I have to account for the deduction of the state and local income taxes (they deduct it against the 28% federal income tax rate they pay, so they get a total net rate of 48.8% (and then the 8.875 sales tax etc.).
You only want to take half their money. Gee how nice of you. |
