Thursday, November 8, 2012

Tax Rates

Using NBER's TaxSim, a program that calculates expected income tax rates from a random sample of actual IRS returns, Corrections produces a graph of after-tax income against before-tax income for several states.  This includes only State and Federal Income Tax, along with FICA taxes.  It assumes a married earner with 2 children, a rent of $1500, and no other deductions or income.  Tax rates are for 2010.

This is a worst case scenario in terms of total income:  all is labor income, which is punished most severely.  Capital income, quite rightly, is generally taxed at lower rates.
Corrections also plots marginal tax rates over labor income: how much is taken of each extra dollar you earn.

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