The Twitter Tax Code

Over the weekend, I ran a series of ten polls on Twitter asking people how much should a theoretical family of four pay in federal income taxes. For the different polls, I used gradually rising incomes; $30,000, $40,000, $50,000, $60,000, $100,000, $200,000, $500,000, $1,000,000 and $10,000,000. For clarity, I only meant federal income taxes and I was asking for the effective rate.

My goal was to see if I could calculate tax brackets that would fit the data points from our 10 polls.

Twitter’s polls only allow for four responses, so I had to use some crude interpolation to estimate the median response.

Here are the results:

$50,000: 0.92%
$60,000: 0.24%
$75,000: 4.73%
$100,000: 9.70%
$200,000: 17.17%
$500,000: 25.39%
$1,000,000: 32.54%
$10,000,000: 36.67%

Here’s what a scatterplot looks like. Income is the X-axis and the tax bill is the Y-axis. Both axes have log scales.

Among the 10 polls, I got more than 20,000 votes. Let me get a few things out of the way. Obviously, this is hardly a scientific poll. I was just doing it for fun.

Also, I adjusted each of the response brackets to get a more realistic result. For example, the lower-income polls had answer ranges that were $3,000 wide. The higher polls had $20,000 ranges. This probably is a big no-no for academics, but I had to make do with what I had.

Some of the results don’t even make sense. For example, there’s a higher tax on $50,000 than on $60,000. Also, some of the answers don’t line up well. For example, our polls show a higher tax on income from $500,000 to $1,000,000 than on income from $1,000,000 to $10,000,000.

Nevertheless, I made a few rough adjustments, brought out some math and calculated our Twitter tax code.

First off, the polls showed a majority for no tax on incomes of $30,000 or $40,000. To make things easy, I also left $50,000 and $60,000 tax free since our polls showed a very small rate for these levels. Also, as I said before, our polls gave these levels a regressive response.

Here’s how it goes:

The first $60,610.78 is tax free.

Income between $60,610.78 and $375,534.57 is taxed at 24.63%.

Income over $375,534.57 is taxed at 39.69%.

That lines up with our poll results very well. One small exception is that under these brackets, the $10 million family is overtaxed by 2.3% (meaning higher than what our polls wanted.)

A number of commenters advocated for a flat tax. That’s an interesting idea but the responses from our polls don’t line up well with any flat tax scenario.

Here’s the log chart again, except for the two lowest data points. To find the best fitting flat tax equation, all we need to do is add a linear trend line.

The slope of the line is the flat tax rate. In this case, it’s 37.04%. The deduction is the y-intercept divided by the slope. In this case, it’s $104,284.

Interesting, but that strays pretty far from our tax responses. Still, two brackets does the trick quite well.

Posted by on February 16th, 2021 at 12:42 pm


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