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I discovered something interesting while playing around with numbers today (I'm bored, what can I say?)
I believe in a progressive tax structure. However, for such a structure to actually be fair, there needs to be a good theory behind how brackets are assigned, the value of each bracket, etc. The whole system should be designed to create analogous burdens on different classes of earners. This is admittedly very difficult and complicated, but there may be one way that is more effective than others.
Let's start with the assumption that, for a single person, it costs about $11,000 a year for necessities. I believe that is the official poverty line in the US for a single person. Under the current system (taking into account only federal income taxes)...
PERSON ONE:
If my math is completely off, please tell me that too.
Thanks!
I believe in a progressive tax structure. However, for such a structure to actually be fair, there needs to be a good theory behind how brackets are assigned, the value of each bracket, etc. The whole system should be designed to create analogous burdens on different classes of earners. This is admittedly very difficult and complicated, but there may be one way that is more effective than others.
Let's start with the assumption that, for a single person, it costs about $11,000 a year for necessities. I believe that is the official poverty line in the US for a single person. Under the current system (taking into account only federal income taxes)...
PERSON ONE:
- Makes $35,500 a year
- Pays $5,325 in taxes (income tax rate of 15%)
- $30,175 left after taxes.
- $19,175 left after subtracting the amount necessary for absolute necessities.
- Thus, after subtracting both federal taxes and necessities, PERSON ONE is left with 54% of his income to either save or spend on non-essential items.
- Makes $1,000,000 a year
- Pays $350,000 in taxes (income tax rate of 35%)
- $650,000 left after taxes
- $639,000 left after subtracting the amount necessary just for absolute necessities.
- Thus, after subtracting both federal taxes and necessities, he is left with 64% of his income to either save or spend on non-essential items.
- (1) PERSON TWO's bracket could be increased to 46%.
- (2) PERSON ONE'S bracket could be decreased to 0.05%.
- (3) You could set the percentage left after taxes and necessities to be somewhere in the middle (e.g., around 56%, which would make PERSON TWO'S bracket 43% and PERSON ONE'S bracket 13%).
If my math is completely off, please tell me that too.
Thanks!
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