- 10% on taxable income from $0 to $17,850, plus
- 15% on taxable income over $17,850 to $72,500, plus
- 25% on taxable income over $72,500 to $146,400, plus
- 28% on taxable income over $146,400 to $223,050, plus
- 33% on taxable income over $223,050 to $398,350, plus
- 35% on taxable income over $398,350 to $450,000, plus
- 39.6% on taxable income over $450,000.
I came home yesterday to get a communication from the IRS which suggested that I had underpaid my 2011 taxes. I went back to my files to figure out whether their assessment was correct and found that for some reason that I had failed to include one 1099 from an investment firm where I have multiple accounts. The missing data showed I had about $4000 in additional income. The incremental increase in taxes for that amount of income amounted to a marginal rate of 33%.
But then there is the kicker of the AMT (Alternative Minimum Tax) which is that bizarre remnant of tax policy which was put there to punish miscreants who (some people think) don't pay enough tax - or at least that was the theory. The provision requires you to take all your income/deductions and figure your tax and then if you meet certain conditions an additional rate is assessed that rate is paid in addition to the tax you owe from the regular code. The AMT complicates the code and at the same time is quite arbitrary. The AMT assessment added another $2300 or a marginal rate of 58% (far higher than any of the posted rates) - the combination of the regular and AMT additions for this increase in my income amounted to an 88% marginal rate. By any standard that sounds a wee bit excessive.