Tax Day - What's your effective income tax rate?

Tomorrow is the deadline for filing personal income tax with the Federal government.

So, what is your effective tax rate for this year's taxes? By effective tax rate, I don't mean how much do you have to pay when you file your return or how much of a refund are you going to get back.

Effective tax rate means, what was your total income from wages, pensions, dividends, interest, self-employment, etc. How much did you make last year?

Then, how much did you actually pay for your income tax? Not how much are you sending in with your return, but how much was withheld, plus how much did you send the government in quarterly payments, plus how much are you sending in with your return? What's the total amount of your Federal Income Tax for this year?

Now, divide the total amount of income tax you paid by the total amount of money you earned, and you have your effective tax rate.

Mine is 9.85% this year. What's yours?

Tom in TN

Federal, State or combined?

Federal- about 20%. State about 7%.

Mines been hovering one side or the other of 12% for the last 3 years. Last year was it for the tuition credit for us, so it will be going up.

David,

I was thinking about Federal Income Tax only. I realize there are many more taxes that we have to pay - state income tax, gasoline tax, sales tax, property tax, etc., but just looking at Federal Income tax - what is the total amount that the Feds kept of your money divided by the total amount of money that you earned this year - that's your effective Federal Income Tax rate.

Because of our progressive Federal Income Tax system, NO ONE pays more than 36% of their income in the form of Federal Income Tax, and most of us pay much less than that.

Tom in TN

28% off the top of pay. Then 13% sales tax on everything. Gasoline at the pumps is $1.30/liter which is over 1/3 tax. Add property tax, vehicle permits, fees etc.
Approx 1/2 of my pay is taken by the government who uses 1/4 of that to do what need's done.

U.S. Tax System explained in Beer
Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it
would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every
day and seemed quite happy with the arrangement, until one day, the
owner threw them a curve. 'Since you are all such good customers,' he
said, 'I'm going to reduce the cost of your daily beer by $20. 'Drinks
for the ten now cost just $80. The group still wanted to pay their bill
the way we pay our taxes so the first four men were unaffected. They
would still drink for free. But what about the other six men - the
paying customers? How could they divide the $20 windfall so that
everyone would get his 'fair share?' They realized that $20 divided by
six is $3.33. But if they subtracted that from everybody's share, then
the fifth man and the sixth man would each end up being paid to drink
his beer. So, the bar owner suggested that it would be fair to reduce
each man's bill by roughly the same amount, and he proceeded to work out
the amounts each should pay.
And so the fifth man, like the first four, now paid nothing (100%
savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now pay $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 ( 22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued
to drink for free. But once outside the restaurant, the men began to
compare their savings. 'I only got a dollar out of the $20,' declared
the sixth man. He pointed to the tenth man,' but he got $10! ''Yeah,
that's right,' exclaimed the fifth man. 'I only saved a dollar, too..
It's unfair that he got ten times more than I! ''That's true!!' shouted
the seventh man. 'Why should he get $10 back when I got only two?
The wealthy get all the breaks!
''Wait a minute,' yelled the first four men in unison. 'We didn't get
anything at all. The system exploits the poor!
'The nine men surrounded the tenth and beat him up. The next night the
tenth man (the richest) didn't show up for drinks, so the nine sat down
and had beers without him. But when it came time to pay the bill, they
discovered something important. They didn't have enough money between
all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our
tax system works. The people who pay the highest taxes get the most
benefit from a tax reduction. Tax them too much, attack them for being
wealthy, and they just may not show up anymore. In fact, they might
start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.Professor of Economics University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.

Hello Ton in TN,

My tax % rate is 0
Guido

federal 5.71%
state 2.40%

born free, taxed to death, i believe it. they say that when you work 8-hours a day, the government takes the first three hours of your pay for taxes, i told my boss i will come to work the last 5-hours to work so i can keep the money. lol

Last year, around 2 pct give or take for federal. It was coming off the worst year I've had in 2 decades and my sales really didnt recover until after the first of the year. We it not for some monthly rental and interest payments coming in plus some capital gains for selling a third of my breeding stock I would not have cash flowed.

So...if you're buying your gasoline in liters...you're apparently Canadian.

So why so much b!tching about US tax rates if you're paying taxes in Canada, rather than the US?

You don't hear me complaining abut the tax rates in Mexico, Canada, or Germany....'cause if I'm not paying them, it's none of my business.

Feds, 15%. State, 4%.

The actual rate is around 40% when you add everything up.

Here's part of an Associated Press article in the 4-17-2011 news:

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.

I didn't see anywhere where he was B!tching or complaining about US taxes? He just answered the question about taxes and posted an article some professor wrote concerning taxes in the US. As far as Canada goes, they pay the highest taxes of any industrialized country in the world. That is something to b!tch about.

Exactly, very well stated

Really 2 of those first 4 are getting paid to drink, by living off of the government. The others would still be working but not paying taxes effectively.

Not considering SS payments; 16.5%.

My first inclination is to say "none of your business". But since others are willing to say, I will too.

My total income tax divided by AGI is 16.8 percent federal, 4.3 percent state. (Michigan income tax is a flat 4.3 percent.)

Do I think it's too much? Not really. There are young men and women in Iraq and Afghanistan making far greater sacrifices. Ask me again when they come home.

There's one point missing in that allegory: "they may not show up anymore" should really read "they bribe the bartender so they don't have to pay for their drinks anymore".

Dr. Kamerschen denies having written it, by the way.

F'in 33%

Fed 25%

I'm in the 25% marginal rate.
effective rate is 16%

I'm at about 12%. Lots of loopholes. Love that tax code!

Nobody smart or industrious enough to be in the 39% bracket is stupid enough to actually pay 39%.

Kind of like dad used to say- "Anybody with enough money to buy that thing would be smart enough not to."

The story he quoted is, after all, a complaint about the US tax system...is it NOT?? So by posting it, he is at least implying some sort of complaint about the US tax system. If he's NOT complaining about the US tax system, then his posting of the "article"--which the "professor" to whom he credits it disavows--has no point, other than to TRY to agitate others.

And if he's Canadian, why would he have a complaint about the US tax system? I'd think he'd have a more valid complaint about the taxes HE's paying, rather than what his NEIGHBORS are paying. If he's not a US citizen, then US taxes are not his concern, IMHO. Let us AMERICANS fight and argue about what goes on on this side of the border, and let the Canadians concentrate on THEIR government and THEIR taxes.

And if he still wants to ridicule the American tax system, then by all means let him move here and become subject to the taxes before he complains about them. Until then, the matter shouldn't even concern him.

Now, now buzz. It's ok. Relax nobody is going to hurt you. Just set down the keyboard and relax as we try this nifty new jacket on you. That little jab in the arm really didn't hurt and it will help you sleep. Your family will here tomorrow to visit so it will be a big day for you.

I just think it's funny as hell that, as a Canadian, you complain about US income taxes that you apparently DON'T have to pay...

Guess I'll have to start complaining about the Canadian beer that I don't have to buy...it would make as much sense.

He probably denies it because he works for the University of Georgia, a government job. He no doubt believes it, but its best for state employees to not criticize tax structures. Its also very hard to bribe the IRS.

I think MarkB ment bribe legislators to write favorable tax break into the tax codes rather than the IRS agents. Legistators are probably much easier and cheaper to buy.

Will you let the nice Doctor help you with your Xenophobia?

Had a similar inclination, but not interested in a political office, nobody here is my next door neighbor, no debt, my stats aren't earth shaking, and the data might overall prove interesting. Generally lower than I would have predicted.

SWS, you understood my point precisely.

Federal: 4.33%

State: 4.29%

Got to love the child credit...