effective income tax rates?

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by SitasMom on 23 September 2012 - 05:09

Anyone know the difference between tax rates and effective tax rates?
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456

	lowest 20%	next 20%	Middle 20%	next 20%	Highest 20%
1979	0.0	4.1	7.5	10.1	15.7
1987	-0.6	3.2	5.8	8.1	14.9
1994	-3.9	1.9	5.3	7.8	15.0
2001	-5.6	.03	3.9	7.1	16.3
2007	-6.8	-0.4	3.3	6.2	14.4

I'm not sure that I understand what this is, but its seems odd that any group should get back more than what they paid in taxes......(federal income tax).

Another interesting thing is that the difference between all groups and the higest group seems to be getting larger with time.

Effective income tax rate:

The actual rate at which a taxpayer pays taxes on income accounting for all taxes and offsets. The rate is calculated by dividing the total of all taxes paid, less offsets, by the total taxable income. The effective rate is typically lower than the tax bracket, which is currently based on a progressive rate scale. For example, a person in the 28% tax bracket who paid a total of state and federal taxes of $13,000 on $100,000 of taxable income has an effective tax rate of 13%.

by GSD Admin on 23 September 2012 - 05:09

Are you serious?

by SitasMom on 23 September 2012 - 06:09

Yes, I don't understand exactly what this is, and would like someone to better explain it, thought maybe there's an accountant lurking.

by GSD Admin on 23 September 2012 - 06:09

You answered your own question.

Effective income tax rate: The actual rate at which a taxpayer pays taxes on income accounting for all taxes and offsets. The rate is calculated by dividing the total of all taxes paid, less offsets, by the total taxable income. The effective rate is typically lower than the tax bracket, which is currently based on a progressive rate scale. For example, a person in the 28% tax bracket who paid a total of state and federal taxes of $13,000 on $100,000 of taxable income has an effective tax rate of 13%

by guddu on 23 September 2012 - 12:09

Sitasmon:
eg You need to look at the tax rate in 2007 for the lowest quintile. Its 4 %, (see link), but they pay -6.8 % or ineffect get 2.8 % back. You can also see that the highest quintiles are also paying a little less over time 15.7 % (1979) to 14.4 % (2007) with a change of 1.3 %, but the major tax advantage has been to the lower income groups where the change is 10.8 % (+4 to -6.8). IMHO

by Keith Grossman on 23 September 2012 - 15:09

I file single, no dependents and take the standard deduction and my effective federal income tax rate for 2011 (not including payroll taxes...social security, medicare, etc.) was 20.3%. I'm clearly paying too much.

by guddu on 23 September 2012 - 21:09

Mortgage deduction helps...if not you must be in the top 20 % of earners.

by Keith Grossman on 24 September 2012 - 00:09

You get hit with a double whammy if you're in the top 20% and your house is paid off so you get no mortgage interest deduction!

by SitasMom on 24 September 2012 - 02:09

Keith, the stats were for federal income not including medicare and SSI........

by Keith Grossman on 24 September 2012 - 13:09

I understand that, Sitasmom; I just reiterated it in my post in case someone else reading hadn't already caught that.

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