The Crossing Wall Street Tax Code

I want to thank everyone who participated in our weekend poll, “How much federal income tax should a family of four that makes $25,000 pay?” We had over 600 responses.

This is the fifth time we’ve run that poll. The other income values we used were $40,000, $100,000, $250,000 and $1 million.

Using some interpolation, I tried to find the median vote for the tax rate for each poll. Here’s what we have:

$25,000: 2.66%
$40,000: 8.31%
$100,000: 16.33%
$250,000: 22.69%
$1,000,000: 28.23%

So the collective wisdom favors a progressive income tax. (Please note that this is not necessarily my opinion, it’s what the poll said.)

Using a little math, we can make a three-bracket tax code that links the data above. It looks like this:

The first $21,249 is tax free.
$21,249 to $74,266 is taxed at 17.79%
$74,266 to $250,000 is taxed at 26.93%
Above $250,000 is taxed at 30.08%

There are lots of ways to connect the poll results, and without more data, the three-bracket result is the simplest. We could add a fourth bracket to make things a bit more realistic. For example, if we added a 10% bracket at around $18,000, then a 20% bracket at $28,000, we could push the 27% bracket to $85,000 while leaving $250,000 and over at 30%. That’s just one example.

I didn’t have any larger point I was trying to prove with the poll. I was simply curious about what our readers thought.

Posted by on May 6th, 2010 at 8:58 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.