Reply to Is 39% tax rate for wealthy really fair?

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[quote=Anonymous][quote=Anonymous]I am a democrat, but I'm not sure I understand the justification of the wealthy paying such a high tax rate.  Can someone explain this to me?  We are middle class and pay about 12%.  It seems like 39% is quite high, even for the wealthy.  This seems like more than their fair share.  What am I missing?  [/quote]

Middle class in this area is about $75K-$125K.  If you make $100K, then your normal tax rate is about 21%.  For you to pay only 12% on taxes, you have about $20K worth of deductions.  Likewise, most high income citizens pay much lower than the high marginal rate.  The marginal tax rates for 2013 will now be:
[code]
Rate 	Single Filers     	    Married Joint Filers 	Head of Household Filers
10% 	$0 to $8,925    	    $0 to $17,850 	        $0 to $12,750
15% 	$8,925 to $36,250     	$17,850 to $72,500 	    $12,750 to $48,600
25% 	$36,250 to $87,850 	    $72,500 to $146,400 	$48,600 to $125,450
28% 	$87,850 to $183,250 	$146,400 to $223,050 	$125,450 to $203,150
33% 	$183,250 to $398,350 	$223,050 to $398,350 	$203,150 to $398,350
35% 	$398,350 to $400,000 	$398,350 to $450,000 	$398,350 to $425,000
39.6% 	$400,000 and up 	    $450,000 and up 	    $425,000 and up
[/code]

Someone--married filing jointly--making over $450K is paying $125,846 or 27.9% on the first $450K [b][u]WITH NO DEDUCTIONS AT ALL[u][b]. If you only take the standard deduction of $12,200 for married filing jointly, that goes down to $121576 or 27%.  I cannot imagine someone making $450K that does not have various deductions whether dependents, mortgage, charitable contributions, personal business exemptions and hoards or others.  The tax code is immense and it's hard to believe that someone that high can't find any deductions.  Additionally, this is only for actual income.  Capital gains taxes (which most higher income citizens have) is only taxed at a 15% tax rate which will lower the effective tax rate as well for the upper class.  Increasing that to $500,000 and even at 39.6% on that last $50K, the marginal rate is still only 29%.  Make it $1M and the marginal rate on the last $550K still has that tax payer paying a 34% effective rate WITH NO DEDUCTIONS.  In truth, most high income tax payers pay less than 20% effective rate.  According to an article in the NYT, in 2007, the highest quartile, 10%, 5% and 1% all paid effective tax rates of between 20-21% on income.  They had larger and larger percentages of their income in investments that paid capital gains instead of income tax.  [url]http://www.nytimes.com/interactive/2012/01/18/us/effective-income-tax-rates.html?_r=0[/url]

The 39.5% marginal rate for income over the first $450K is actually quite low.  The historical rate is shown below.  With only a few exceptions, we STILL have the lowest marginal tax rate for the highest income earners ever.  It was lower from 1924-1932 (period leading into the Great Depression), 1988-1992 (Bush 41) and then during 2002-2012 (Bush 43, not shown on the graph, but the same rate as 1992-2000).  It was actually 93% in 1945, post-WWII.

In addition, look at the capital gains tax rate.  We are at the lowest rate since 1933.  That is where the real money is and a huge reason why the wealth disparity between the rich/upper class and the upper class/middle class and lower have increased steadily over time.

[img]http://i.huffpost.com/gen/267149/MARGINAL-TAX-RATES.jpg[/img]

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