Tax Rates, Marriage Penalty, etc. (Long)
Hi folks, Robin Sojourner asked me to stop in and talk about the US Tax Structure.
Keep in mind that I'm not a Tax Professional (nor do I play one on TV <grin>

but I
am an avid role-player, and the IRS lets me pretend to be an accountant once a year --
with some very complex rules to follow -- for "free". (What more can a man ask?)
Anyway, the US tax laws were set up to reward being married. The tax rates were
lower, and the credits were higher for married people than for any other group
(save single head of household -- basically a single parent). However, the 2004
tax tables leveled the playing field.
In the following tables, I've assumed that you've already reduced your taxable income
by use of all the standard deductions and exclusions.
For a single person the rates (in 2004) are:
If taxable
income is over - - - But not over - - - The tax is:
$0 - - - - - -- - - - - $7,150 - - - - - - 10% of the amount over $0
$7,150 - - - - - - - - $29,050 - - - - - $715.00 plus 15% of the amount over 7,150
$29,050 - - - - - - - $70,350 - - - - - $4,000.00 plus 25% of the amount over 29,050
$70,350 - - - - - - - $146,750 - - - - - $14,325.00 plus 28% of the amount over 70,350
$146,750- - - - - - - $319,100 - - - - $35,717.00 plus 33% of the amount over 146,750
$319,100 - - - - - - - no limit - - - - - $92,592.50 plus 35% of the amount over 319,100
For married filing jointly:
If taxable
income is over - - - But not over - - - The tax is:
$0 - - - - - - - - - - - $14,300 - - - - - 10% of the amount over $0
$14,300 - - - - - - - $58,100 - - - - - - $1,430.00 plus 15% of the amount over 14,300
$58,100 - - - - - - - $117,250 - - - - - $8,000.00 plus 25% of the amount over 58,100
$117,250 - - - - - - $178,650 - - - - - $22,787.50 plus 28% of the amount over 117,250
$178,650 - - - - - - $319,100 - - - - - $39,979.50 plus 33% of the amount over 178,650
$319,100 - - - - - - no limit - - - - - - $86,328.00 plus 35% of the amount over 319,100
For married filing separately:
If taxable
income is over - - - But not over - - - The tax is:
$0 - - - - - - - - - - - $7,150 - - - - - - 10% of the amount over $0
$7,150 - - - - - - - - $29,050 - - - - - - $715.00 plus 15% of the amount over 7,150
$29,050 - - - - - - - $58,625 - - - - - - $4,000.00 plus 25% of the amount over 29,050
$58,625 - - - - - - - $89,325 - - - - - - $11,393.75 plus 28% of the amount over 58,625
$89,325 - - - - - - - $159,550 - - - - - $19,989.75 plus 33% of the amount over 89,325
$159,550 - - - - - - - no limit - - - - - -$43,164.00 plus 35% of the amount over 159,550
The rates seem to be lower for "joint" filers, but this is a false impressions.
Here's a concrete example (based on the assumptions that there are one or two
adults -- no children -- no itemization of deductions):
If you're single and and earn $57,950, you're paying taxes on $50,000 (after the
standard deductions and exemptions). The tax bill is $9237.50.
If you're married and filing jointly and your combine income is $115,900, you're
paying taxes on $100,000 -- $50,000 each (after the standard deductions and
exemptions). The tax bill is $18,475. (Double the single's bill.)
If you're filing separately and earn $57,950, you're paying taxes on $50,000
and the tax bill is $9237.50 (If your spouse is also earning $50,000, double
it -- $18,475.)
So I conclude that the "current" tax tables have made us all equal. (Go ahead,
check
http://www.irs.gov and check the math -- I did twice.)
The marriage penalty is really that if two people are each earning a wage, their
incomes are combined before going to the tax tables. If the two incomes are very
different -- one person earning $10,000/year the other about $90,000, the combined
income will be the $100,000 of the example. However, the withholding for the spouse
with the lower income will be at the lowest rate. This will leave the couple with a big
deficit in "taxes withheld."
Questions? Class dismissed. <grin>
-Tompta