Phil Mickelson - Tax Me More and I May Just Quit

http://www.latimes.com/sports/sportsnow/la-sp-sn-phil-mickelson-taxes-20130121,0,1105055.story?fb_action_ids=10200128933481992&fb_action_types=og.likes&fb_ref=s%3DshowShareBarUI%3Ap%3Dfacebook-like&fb_source=other_multiline&action_object_map=%7B%2210200128933481992%22%3A472703756120990%7D&action_type_map=%7B%2210200128933481992%22%3A%22og.likes%22%7D&action_ref_map=%7B%2210200128933481992%22%3A%22s%3DshowShareBarUI%3Ap%3Dfacebook-like%22%7D

Oh Phil.  Sadly, your math is pretty poor.  If you make $900,000 playing golf, you taxes will look like this:

Federal Taxes up to $450,000 - around 22% - $99,000
Federal taxes above $450,000 - 39.6% - $178,200

FICA, etc. on first $114K - around 15% - $17,100.

California State Tax  - up to $250,000 - aorund 7% - $17,500
250K to 300K - around 10% -  $5,000
$300K to $900K - around 12% - $72,000


On his first $900,000 in earnings, Phil is taxed $388,000.  43%.   Not 62%, not 63%.  43%.

(Someone self-employed making $114K, by the way, pays 22%+7%+15% = 44%, 1% more than someone making $900,000).

What Phil is REALLY bitching about is that he makes SO MUCH MORE than $1,000,000 a year, that every dollar he makes above $1,000,000 is taxed at 39.6%+13.3%(the new California rate).  So it is the amount above $1,000,000 that is killing him.  Once you get to $2,000,000, you are paying 43%+53% divided by 2 = 48% average rate.

So imagine some scenarios for Phil:

Make $0 - pay 0%, get some money back probably
Make $114,000 - pay 44%
Make $900,000 - pay 43%
Make $2,000,000 - pay 48%

So Phil's best option (assuming he has $0 in expenses), is to make $0.  I doubt he will do that.  Once you get to $114,000, you may as well keep going at least us to $2,000,000.  I mean, does the extra 4% really discourage you that much, Phil?  You'd stop working at $100K or $900K to save 4%?

If you make, say, $30,000,000 a year (as Phil may), then your average tax may approach 53%.  So you need to ask yourself again - would I reject $28,000,000 in income because I would pay 5% more tax than I would at $2MM???  I'd think not.

Of course, Phil's real bitch is that he is a California resident.  So if he moves to Texas he can save a good amount of money (Texas 0%, California 13.3%) except that in Phil's line of work he gets taxed where he makes the money (so, places like CA, NY, MA, all places with big tax rates).

Bottom line - Phil may move, but he isn't going to retire, and he isn't getting taxed at 63%.