Visualizing economics

January 30, 2012 3:00 PM

Visualizing Economics. Catherine Mulbrandon makes visualizations of economic data, including the variation of the top marginal tax rate over time and the high cost of buying a TV on credit.
posted by escabeche (13 comments total)

marginal tax rates, full size
posted by mod zero at 3:13 PM on January 30

Option 3, buy your TV with one of Best Buy's 24 months-no interest deals, pay it off in the allotted time, pay $1500. I have been freeriding for years on the backs of people who are bad at math, apparently.
posted by Horace Rumpole at 3:54 PM on January 30

I was listening to coverage this morning on how Mitt Romney only had a tax rate of 13.9% last year, because the vast majority of his $20 million annual income is from investments, and carried interest/capital gains are taxed lower than other forms of income.

Someone earning $20,000 per year in the US would apparently be taxed at 15%.

This seems obscene to me. Talk about regulatory capture.
posted by His thoughts were red thoughts at 4:36 PM on January 30 [2 favorites]

Someone earning $20,000 per year in the US would apparently be taxed at 15%.

No, someone earning $20,000 (and filing as head of household) would have a taxable income of approximately $11,500. This would put them in the lowest bracket, with a marginal rate of 10%. So this person would owe $1150 in federal income taxes, for an effective tax rate of 5.75%.

That being said, the favorable treatment of capital gains and carried interest is pretty vile.
posted by HumuloneRanger at 5:46 PM on January 30 [4 favorites]

No, someone earning $20,000 (and filing as head of household) would have a taxable income of approximately $11,500. This would put them in the lowest bracket, with a marginal rate of 10%. So this person would owe $1150 in federal income taxes, for an effective tax rate of 5.75%.

Ah, my bad. I clearly suck at tax calculations.

Feel free to provide a better comparison - for a normal, not super rich person, who earns (for the sake of argument) all their income through salary, how much would they have to earn to be taxed at 15%?
posted by His thoughts were red thoughts at 7:17 PM on January 30

No, someone earning $20,000 (and filing as head of household) would have a taxable income of approximately $11,500. This would put them in the lowest bracket, with a marginal rate of 10%. So this person would owe $1150 in federal income taxes, for an effective tax rate of 5.75%.

I don't think that's right either. It looks like you just took the head of household standard deduction, but no personal exemptions. You'd get at least one for yourself, plus more if the qualifying person(s) that gave you head of household status are also dependents.

For example, if you have one dependent who is your qualifying person, I think that's $3,700 * 2 = $7,400 in personal exemptions, which brings your taxable income down to $4,100 and tax down to $410, for an effective rate of about 2%.

I hate graphs of marginal rates, because they say nothing.
posted by planet at 8:09 PM on January 30

Seriously guys, I picked $20,000 out of the air. I apologise for creating this derail.
posted by His thoughts were red thoughts at 8:14 PM on January 30

His thoughts were red thoughts: "who earns (for the sake of argument) all their income through salary, how much would they have to earn to be taxed at 15%?"

As an example, I earned roughly 50k and paid roughly 6k in federal taxes for an effective rate of 12 percent. That's without dependents, without mortgage interest, without head of household status or EIC. I could have contributed more to an HSA / FSA for certain medical expenses which don't qualify under itemization, and to the 403b, and will ramp up retirement as soon as the car is paid off.
posted by pwnguin at 9:22 PM on January 30

Whoops, forgot the conclusion. Obviously your hypothetical effective tax rate of 15 percent would be require income north of 50k. It's hard to say since there's a lot of stuff phases out at different income levels.
posted by pwnguin at 9:30 PM on January 30

David 'Macca' McCandless has an excellent site dealing in all sorts of visualisations:

Information Is Beautiful
posted by GallonOfAlan at 5:18 AM on January 31

I was listening to coverage this morning on how Mitt Romney only had a tax rate of 13.9% last year, because the vast majority of his $20 million annual income is from investments, and carried interest/capital gains are taxed lower than other forms of income.

Someone earning $20,000 per year in the US would apparently be taxed at 15%.

This seems obscene to me. Talk about regulatory capture.

It is and it isn't. The purported reason for the lower tax rate for cap gains is that it is money you are making on money you've already been taxed on. The theory goes that you for example make $10,000 in 2005 and pay $2500 in taxes on it. Then you invest the rest and make $500 a year and pay 15% on that, every year. If you had spent that money, the government just got its 25%. By investing it, you get more and the government gets more. And by investing it, it goes back into the economy and pays salaries and generates income taxes that way.

That's the theory anyway. It's hard to reconcile that with us poor schlubs making 5 or 6 digit incomes paying a bigger percentage than those with 7 or 8 digit incomes.
posted by gjc at 6:53 AM on January 31

The purported reason for the lower tax rate for cap gains is that it is money you are making on money you've already been taxed on.

Except when it isn't, as in the case of section 1256 contracts which treats over half of your income at the long term rate even if you only hold for a day. I gather some hedge fund managers get paid in options and use this to reclassify their income as cap gains. I'm sure there's other tricks hiding in Romney's unreleased returns.
posted by pwnguin at 9:39 AM on January 31

So now when someone tells you we need to cut services to make ends meet, you have a graph to show them that proves them wrong. Awesome!
posted by DU at 10:47 AM on January 31