The top federal income tax bracket is 37% and the top California tax bracket is 12.2%. This is for income exceeding 500k. So disregarding local taxes and property taxes, in California most of this income would be taxed at 49.2%.
This is a subthread about the median income that we would compare the $7M payout to, not the $7M payout itself. It certainly falsifies the graph paulluuk linked to, and using high CA taxes on the Bay 12 payout only further undermines paulluuk's comparison.
Apologies for the lack of clarity, I was addressing just this sentence in the parent
> That would require greater than 50% taxation, which isn’t realistic at all in the United States.
My point is that higher than 50% total taxation on a large single-year income (considering local and corporate taxes) is entirely possible in the United States, though it may be less in some states than other. I’m not saying that the estimate is correct as the Tarn Brothers don’t live in California. But if they took the income to a corporation, paid corporate income tax, and then took the whole income or a large part of it as dividends in a high tax state, then >50% is quite possible. On a pass-through entity, close to 50% is the standard and unavoidable in high tax states.
Federal taxes are marginal. You don't pay 37% on the full 500k, you pay 37% on anything below that bracket start point, you pay the lower rates. For instance, if you're single and declare $1M in income your effective tax rate is more like 33.5% and not 37%.
