Here is a scenario for you:
A man with a family of four lives in Westchester County New York. He is self-employed with an office in Manhattan. He has a masters degree. His education took 7 years and cost $200,000.
His yearly income from his business is $450,000
Federal Income Tax $177,750
Social Security Taxes $15,000 (since he is self-employed he pays full 15%)
New York State tax $65,120 (New York is considering raising this rate for 2009)
New York City tax $18,000
Total Income after taxes $174,130
Property taxes in Westchester NY are expensive, so you need to figure about $10,000 for those; that will bring income down to $164,000 per year.
He is keeping 36% of his income. Is he really rich? He now has to pay for food, clothing, transportation, utilities, student loans, and other necessities. Yes, he still makes a decent living, but he is not "rich".
The health care plan that is in the house right now will take an additional 3% of his income. Would you want to work for .30 on the dollar? It would behoove this man to take several months off during the year to lower his yearly income. He will actually have more money for working less.
***These are raw numbers. Tax rates are based on 2009 federal rate and 2008 NY rates.
1 hour ago