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  • #46
    Originally posted by White.Beard.Doc View Post

    I went back to the state tax calculator by putting in different income figures as a test. Initially I made an error on my state marginal rate at the tax cliff. It is even higher than I though. For an extra $5,000 in income over the high income threshold, I pay $4,687 extra in state taxes. That works out to 94% on each additional dollar earned once I go over that tax cliff. And the feds tax at 37%. So the total combined income tax on $5,000 is actually $6,537, or 131%, or $1.31 for each dollar of additional earnings (I did not count the medicare taxes, which would make it even higher). And then once the state gets you up to the 8.82% for your total income all the way back to your first dollar earned by taxing you at 94%, then the state marginal rate goes back down to 8.82% for further additional earnings.

    I think I won the prize for the highest marginal rate at 131%. I am doubtful that anyone can top that. I know there are many strange phase outs buried in the tax codes that can lead to high marginal rates, but this takes the prize for crazy tax law.

    The stated purpose of the state tax cliff is to claw back more taxes from higher income earners. They go back to your first first dollar earned and then recalculate your tax at the highest rate for every single dollar of earnings. Through this process they remove the graduated, lower marginal rates on your initial dollars earned for the year once you go over that high income threshold.
    Can you just ask your employer to not pay you once you get to a certain point?

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    • #47
      similar realization from another new yorker https://www.bogleheads.org/forum/viewtopic.php?t=247046

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      • #48
        Wow. That's some serious first world problems.

        DAF and some real estate transfers to the kids via LLC shared ownership maybe in order at this point

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        • #49
          Originally posted by White.Beard.Doc View Post

          I went back to the state tax calculator by putting in different income figures as a test. Initially I made an error on my state marginal rate at the tax cliff. It is even higher than I though. For an extra $5,000 in income over the high income threshold, I pay $4,687 extra in state taxes. That works out to 94% on each additional dollar earned once I go over that tax cliff. And the feds tax at 37%. So the total combined income tax on $5,000 is actually $6,537, or 131%, or $1.31 for each dollar of additional earnings (I did not count the medicare taxes, which would make it even higher). And then once the state gets you up to the 8.82% for your total income all the way back to your first dollar earned by taxing you at 94%, then the state marginal rate goes back down to 8.82% for further additional earnings.

          I think I won the prize for the highest marginal rate at 131%. I am doubtful that anyone can top that. I know there are many strange phase outs buried in the tax codes that can lead to high marginal rates, but this takes the prize for crazy tax law.

          The stated purpose of the state tax cliff is to claw back more taxes from higher income earners. They go back to your first first dollar earned and then recalculate your tax at the highest rate for every single dollar of earnings. Through this process they remove the graduated, lower marginal rates on your initial dollars earned for the year once you go over that high income threshold.
          That is ridiculous. I guess that's one way to tax the Wall Street elite folks.

          Seems like NY state has the highest potential tax rates by far, even ahead of CA.

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          • #50
            the "recapture" system converts the progressive tax brackets to a flat tax system for the highest earners. It's a way they can generate more state income tax revenue, without having to increase the top bracket number.

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            • #51
              This link (from a right wing think tank so ignore it if you want) says Arkansas, Nebraska, Coonecticut, and New York are the states that have the recapture system:
              https://taxfoundation.org/individual...ket-structure/

              Fortunately wasn't planning on living in them anyway.

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              • #52
                This is so incredibly sad. Honestly, it's punishment. I'd consider not working the rest of any year I started hitting income levels where this would happen.

                I don't prefer to wish negative things to anyone/anything. But >100% tax rates should absolutely cause all levels of government to lose tax payers who choose to move. I can only shake my head when Jersey had meetings about tax revenue when a single tax payer moved to Florida. Or when the Governor of New York almost begged the state legislature not to raise income taxes on the wealthy because the wealthy were moving out.
                "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓

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                • #53
                  It's to hit the year end bonus structure perhaps?

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                  • #54
                    Federal marginal is 32%, and effective is 23.9%. State marginal is 6.7% and effective is 6.6%. Felt bad for myself then readWhite.Beard.Doc ’s post and felt less bad for myself.

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                    • #55
                      to be clear the top tax bracket in NY for MFJ puts one at a very high level of income, beyond that of most everyone here.

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                      • #56
                        Originally posted by jacoavlu View Post
                        to be clear the top tax bracket in NY for MFJ puts one at a very high level of income, beyond that of most everyone here.
                        Yeah I think it is over 2M.

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