Good points. More links for those like me, who are curious (but not interested in debating the policy trends)
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You can look up historical US federal income tax rates at Historical Income Tax Rates and Brackets, 1862-2021 | Tax Foundation .
Obviously, this does not include payroll taxes assessed on labor income only (effectively a regressive income tax, both explicitly and due to the type of income it is assessed on), or other kinds of taxes that may be paid.
It was rhetorical question since we know that tax rates are not the lowest itâs ever been.
Regarding the payroll tax. Social Security benefits are definitly progressive in the way itâs calculated.
Social Security benefits are progressive: they represent a higher proportion of a workerâs previous earnings for workers at lower earnings levels. For example, benefits for a low earner (with 45 percent of the average wage) retiring at age 65 in 2023 provide $14,824 a year, replacing about half of their prior earnings. But benefits for a high earner (with 160 percent of the average wage) provide $32,345, replacing about 30 percent of prior earnings, though they are larger in dollar terms than those for the low-wage worker.
Higher wage earners also have to pay the Additonal Medicare Tax . Plus, Medicare Part B premiums are much more for higher income individuals despite paying more into the system and receiving the same benefits.
And donât forget the Net Investment Income Tax that raises long term capital gains up to 23,8% while those in the 12% marginal brackets pay $0 long term capital gains tax.
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@iglooo, I thought we were talking about folks who have a meaningful shot at exceeding the lifetime gift tax exemption. Lowering the lifetime gift tax exemption is not going to affect the vast majority of the general public, I agree, as their net worth will be significantly less than the lifetime gift tax exemption, even if the exclusion is significantly reduced. So the fact that they donât have access to the kinds of tools that would be helpful seems irrelevant to the conversation.
Letâs limit ourselves to talking about folks who have a good chance of exceeding a reasonably high lifetime gift tax exemption. Many are not just highly paid salaried employees, though some may be. My belief is that a significant proportion of those folks have flexibility in how they structure their income. If my belief is correct, many of those people with advance planning on top of the flexibility can avoid paying federal estate tax even if the lifetime exclusion is cut in half. They may not as they may not do their work in advance or may not have enough flexibility. But, if they have the flexibility, they also have the ability to hire capable attorneys/tax folks to plan around the estate tax.
Had to look up HCE (Highly Compensated Executive). LOL, tis above my pay grade.
Not âExecutiveâ, an employee with $150,000 p.a. (used to be $125,000).
A good salary, but far from exceptional in many areas of the country, or at larger businesses.
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@digitaldad is correct . The term is âHighly Compensated Employeeâ.
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The limits of qualified plans for HCEs are meaningful. I have heard that some organizations find other ways like deferred comp plans to provide additional retirement options for highly compensated people. I donât know the tax implications of deferred comp.
Yup. Close-in burbs around DC are prime territory for tear-downs.
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Companies offer non-qualified deferred comp to escape ERISA discrimination rules.
They are tax deferred.