You are all over the map in your retort here. We are discussing taxes imposed on the person. A person is usually a separate entity from a business.
The purpose was that you selected a person with a high income an income associated with either extremely highly compensated individuals short of professional athletes, and of course incomes associated with business ownership.
A person is usually a separate entity from a business.
Usually? Usually not actually. And even if it were its not the distinction that makes a difference. Vast majority of businesses are sole proprietorships or LLCs and if owned by one person which is exceedingly common, that income is a 'disregarded entity' for federal tax purposes and one fills out a Schedule C.
My point though was much simpler which is that, irrespective of whether the LLC is considered 'separate' or not.....the income flows to the individual and is taxed, and we're looking at that of course, but we shouldn't forget that, before we get to the profit, the legitimate business expenses include expenses, that themselves constitute some important tax payments themselves, WHICH YOU ARE NOT COUNTING.
If you want to suddenly talk about businesses here you skew the conversation.
Unfortunately you contemplate an income strongly associated with business ownership.
The discussion is about personal income taxes. Business income is a whole 'nother matter.
Putting aside C Corps for a second here, business income flows through to the personal return. In the LLC I had, it was right on the Schedule C, let's say that you and I were partners in an LLC, the LLC would file, the profit would result in a K-1 being reported as our respective share of that profit.
We could even IGNORE the profit altogether and simply create a situation where the business pays the owner(s) a salary sufficient to make the business' income ZERO.
You're exempting the unexemptable.
What do you think a business owner's income on his personal tax return is?
BTW... I can most certainly disagree as its not what people are paying. You think they are, let us see a specific example. I don't think you can show one. I gave you a specific scenario; one in which I attempted to maximize the taxes to be paid... I am happy to do a New Jersey example. I have a hard time believing it much different than the California example.
Like I noted, property tax plus Social Security tax is getting really ordinary incomes from median up to the ceiling itself up to 30% and at that point its just a question of how you're similarly situated. After that in NJ you still have to pay gas tax, sales tax, state income tax, and federal income tax itself.
(FYI in NJ sales tax is currently 7% and was just lowered slightly to accommodate for a higher gas tax, the ultimate goal is to lower sales tax to 6% which is said to save each NJ family $500 from $3,500 to $3,000 in sales tax payments)