Forty-four of 50 US states worsen inequality with ‘upside-down’ taxes
Forty-four of 50 US states worsen inequality with ‘upside-down’ taxes
New research found that poorest fifth pay a tax rate 60% higher, on average, than the top 1% of households
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I'm curious about more specific numbers for Washington. I live in the Seattle area, make "good for working class" money, something like 25-30% of my income goes to tax, and we don't even have state income tax. Do people making less pay like 50% taxes, if so is that all federal based, is the group of people they're talking about just so far above my income level I'm not grasping it?
In the grand scheme of things “Good for working class” money is not a lot of money. You are one of the ones paying those higher taxes proportional to your earnings.
Really sorry if I'm asking basic questions here I'm not good at processing this kind of information all that well. So is there like a cutoff point where earnings are exempt from taxes? Is it because it gets tied into other things like stocks that it isn't taxed? If stocks how does that work because I get partial income in company stocks and they take out a huge chunk of those so idk how they wouldn't be taxed for rich people. I'm not trying to complain about my situation I don't mind being taxed I'm just curious what's going on here
If you only look at income tax brackets, that might explain your confusion because income tax is only one type of tax. On the other hand, sales tax tends to impact lower income people more than wealthy people because even though everyone may pay the same 5% sales tax, if you kept a ledger of all the sales tax everyone paid over the course of a year and compared it to everyone’s income, you’d find that as a percent of their income, lower income people paid more than wealthy people, which is why this article is saying some states’ tax structures are regressive, because when you look at the whole picture, not just income taxes but all types of taxes, the states that are “upside-down” tend to rely more heavily on sales taxes than income taxes to raise money.
The report published by the Institute of Tax and Economic Policy (which the article references) has more details if you’re interested enough to dig in further.
Thank you for the info and the additional reading
There is no cutoff, but:
- we have increasing brackets to a point, then they stop increasing , which can make upper middle the highest income tax payers
- income tax is only on “regular income” like salary. Wealthier are more likely to get their money as other types of income, taxed at different amounts, or play accounting shenanigans to shelter their money from taxes.
- sales and excise taxes proportionally affect people with less income more, since a much higher proportion of their income goes to necessities
- there’s a tendency to try to correct the regressiveness through greater complication, like my state does, but then are the less well off able to handle the extra paperwork to benefit?
Edit…
- social security and Medicare taxes are only in the first x amount of income so are very regressive, although the payback is also less beneficial to the well off so I’m not sure how to count these
Hmm I think I'm starting to catch on here. We're really in a mess of a situation like we fix one thing sounds like multiple things can just hop in to get around it...
https://smartasset.com/taxes/washington-paycheck-calculator#SpXkRlFJKS
I've found this website pretty accurate. It also breaks down income and fica etc
Washington is pretty easy since no state income taxes
To answer your question. As you make more, each addition amount is taxed a little more. So rich people and poor people pay the same rate on their first $50k, but rich people will pay higher rates on each check after 50k . There are several of these brackets and the. They kinda work like a step function.