* Dan Minette ([EMAIL PROTECTED]) wrote: > >long-working spouse. > > But, I still don't see it getting above 40 %. Let's look at the last $1k > of earnings of the spouse looking at a 20k/year job. She's in the 15% > marginal income tax bracket, her SS tax is 7.65%, and she is working for > too few years to qualify for SS on her own. That gives a marginal federal > tax rate on that last $1k to 22.765%. We'll also assume her net tax is her > gross tax, since she gets no extra SS from working. > > They will spend more money, and on some of that spending they'll have to > pay sales tax. But, another 3%-4% should cover that. > > With taxes on the phone bill and what-not, I can see the marginal tax rate > rise to 30%, but not much more unless they now buy a new house with higher
average tax rate = ( present value of lifetime taxes paid minus present value of lifetime benefits received from government ) divided by present value of lifetime earnings R = (T - B) / E marginal rate = dT/dE - dB/dE I think their calculation is much more extenstive than yours, but I'm glad you want to check their numbers. I'll work through it in more detail this weekend (and post some excerpts from the book that explain in more detail what they are calculating) In the meantime, a couple things that I can think of that would make their figure larger than yours: If the extra spousal income bumps the couple into the next federal income tax bracket, say from 15% to 25%, depending on the brackets when the calculation was done. You didn't count state tax, which in California or other high tax states could be more than 10%. Economists tend to count the full FICA contribution, which I think is either 13.85% or 15.3% (I'll check the exact figure later). If you are self-employed, you pay the full amount yourself. If you are not, then economists figure the amount your employer pays would have gone to you if it weren't for the tax. Also, they don't look just at SS benefits when they net out the changes. If the present value of all government benefits went down when the spouse starting working, then netting out dB/dE can actually increase the marginal rate. They include things like medical benefits and welfare benefits as well as SS. Anyway, more later. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
