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Vermont
In reply to the discussion: Advocates Want to Raise Taxes for Wealthiest Vermonters by 3 Percent [View all]
mahatmakanejeeves
(60,930 posts)1. The large print giveth, and the small print taketh away. Percent versus percentage points.
Last edited Sun Nov 12, 2023, 09:53 AM - Edit history (4)
Taxes in VermontFor the 2022 tax year, the income tax in Vermont has a top rate of 8.75%, which places it as one of the highest rates in the U.S. Meanwhile, total state and local sales taxes range from 6% to 7%.
Let's do some arithmetic. The new tax rate can be plotted as a curve. The x-axis is your income, and the y-axis is your tax rate. The more you go out the x-axis on income, the more the curve flattens out, as your income is taxed increasingly at the new rate. The tax increase is not 3 percent, but a much higher number. Eventually it looks like this:
(((new tax rate) - (old tax rate))/(old tax rate)) X 100 percent = income tax rate as your income goes up.
((8.75 + 3) - (8.75))/(8.75) X 100 percent = 34 percent.
The real tax increase approaches 34 percent as your income goes up.
This sounds like the Massachusetts model. I'll have to change the numbers and go through this again, but here's what I wrote about Massachusetts.
Sun Aug 13, 2023: The large print giveth, and the small print taketh away. Percent versus percentage points.
Full disclosure: I do not live in Massachusetts, and I do not have an income of a million dollars per year or more.
My impression is that the current Massachusetts income tax rate is on the order of 5 percent for plain old income. I.e., not capital gains, just plain old salary and bonuses.
Right now, if you make one million per year, you pay 5 percent of that, or $100,000 in income tax. Next year, same thing.
Right now, if you make two million per year, you pay 5 percent of that, or $100,000 in income tax.
Next year, you'll pay $50,000 on the first million and $90,000 on the second million, for a total income tax of $140,000.
Put in the numbers and turn the crank. ((140 - 100)/100) times 100 = 40 percent.
RPN, you know what to do.
That "you'll only pay 4 percent more" turns into a 40 percent tax increase. Again, this is without deductions, exemptions, capital gains tax rates, and so on.
If you brought in 3 million in 2022, you paid $150,000 in income tax.
If you bring in 3 million in 2023, you'll pay $50,000 on the first million, and then $180,000 on the next two million. Your total income tax for tax year 2023 will be $230,000. That's a tax increase of ((230 - 150)/150) times 100 = 53.3 percent.
Four million income in 2022? $200,000 income tax. Four million income in 2023? $50,000 on the first million and $270,000 on the next three million. Your 2023 tax year income is $320,000, or a ((320 - 200)/200) times 100 = 60 percent tax increase.
Am I wrong? Are there any CPAs from Massachusetts on DU?
Thanks.
My impression is that the current Massachusetts income tax rate is on the order of 5 percent for plain old income. I.e., not capital gains, just plain old salary and bonuses.
Right now, if you make one million per year, you pay 5 percent of that, or $100,000 in income tax. Next year, same thing.
Right now, if you make two million per year, you pay 5 percent of that, or $100,000 in income tax.
Next year, you'll pay $50,000 on the first million and $90,000 on the second million, for a total income tax of $140,000.
Put in the numbers and turn the crank. ((140 - 100)/100) times 100 = 40 percent.
RPN, you know what to do.
That "you'll only pay 4 percent more" turns into a 40 percent tax increase. Again, this is without deductions, exemptions, capital gains tax rates, and so on.
If you brought in 3 million in 2022, you paid $150,000 in income tax.
If you bring in 3 million in 2023, you'll pay $50,000 on the first million, and then $180,000 on the next two million. Your total income tax for tax year 2023 will be $230,000. That's a tax increase of ((230 - 150)/150) times 100 = 53.3 percent.
Four million income in 2022? $200,000 income tax. Four million income in 2023? $50,000 on the first million and $270,000 on the next three million. Your 2023 tax year income is $320,000, or a ((320 - 200)/200) times 100 = 60 percent tax increase.
Am I wrong? Are there any CPAs from Massachusetts on DU?
Thanks.
Edited: it turns out to be a lot more complicated than this. There are four tax brackets for Vermont income tax.
Vermont Income Taxes {existing}
Vermont has four tax brackets for the 2022 tax year, which is a change from previous years when there were five brackets. Rates range from 3.35% to 8.75%. The table below shows rates and brackets for the four main filing statuses in Vermont.
Income Tax Brackets {existing}
Single Filers Married,Filing Jointly, Married, Filing Separately, Head of Household {not shown}
Vermont Taxable Income Rate
$0 - $42,150 3.35%
$42,150 - $102,200 6.60%
$102,200 - $213,150 7.60%
$213,150+ 8.75%
Vermont has four tax brackets for the 2022 tax year, which is a change from previous years when there were five brackets. Rates range from 3.35% to 8.75%. The table below shows rates and brackets for the four main filing statuses in Vermont.
Income Tax Brackets {existing}
Single Filers Married,
Vermont Taxable Income Rate
$0 - $42,150 3.35%
$42,150 - $102,200 6.60%
$102,200 - $213,150 7.60%
$213,150+ 8.75%
Vermont Income Taxes {new}
Vermont has four tax brackets for the 2022 tax year, which is a change from previous years when there were five brackets. Rates range from 3.35% to 8.75%. The table below shows rates and brackets for the four main filing statuses in Vermont.
Income Tax Brackets {new}
Single Filers Married,
Vermont Taxable Income Rate
$0 - $42,150 3.35%
$42,150 - $102,200 6.60%
$102,200 - $213,150 7.60%
$213,150 - $500,000 8.75%
$500,000+ 11.75%
I'd have to write a spreadsheet for this, and this is getting to be more work than I had in mind. My point, though, is valid. If anyone does write the spreadsheet, he'll see that the actual increase in tax rate will be more than the amount of the surcharge.
Sorry.
Right now, if you make $500,000 per year, you pay 8.75 percent of that, or $43,750 in income tax. Next year, same thing.
Right now, if you make one million per year, you pay 8.75 percent of that, or $87,500 in income tax.
Next year, you'll pay $43,750 on the first $500,000 and $58,7500 on the second $500,000, for a total income tax of $102,500.
Put in the numbers and turn the crank. ((102.5 - 87.5)/87.5) times 100 = 17.1 percent. That's your tax increase.
RPN, you know what to do.
That "you'll only pay 3 percent more" turns into a 17.1 percent tax increase. Again, this is without deductions, exemptions, capital gains tax rates, and so on.
More numbers.:
If you brought $2,000,000 in 2023 you paid $175,000 in income tax.
If you bring in $2,000,000 in 2024, you'll pay $43,750 on the first $500,000, and then $176,250 on the next $1,500,000. Your total income tax for tax year 2024 will be $220,000. That's a tax increase of ((220 - 175)/175) times 100 percent = 25.7 percent.
$4,000,000 income in 2023? Your total tax is $350,000.
$4,000,000 income in 2024? You'll pay $43,750 on the first $500,000 and then $411,250 on the next $3,500,000. The total tax will be $455,000. The tax increase will be ((455 - 350)/350) times 100 = 30 percent
The more you make, the more your tax increase approaches ((8.75 + 3) - (8.75))/(8.75) X 100 percent = 34 percent.
Someone check my math. It's still early here. At any rate, it's not a 3 percent increase.
Thanks.
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The large print giveth, and the small print taketh away. Percent versus percentage points.
mahatmakanejeeves
Nov 2023
#1