Followup on relative Tax Rates

I wanted to followup yesterday's post and give some examples to clarify the tax rates people actually pay. Because the talking heads just don't give real data. Conservatives generally ignore social security taxes, and liberals rebut with "but you forget social security taxes" yet don't followup with the simple math to get the true total percentages. Also, I wanted to add that I do not necessarily consider Ari Fleischer agreeing with me to be a good thing.

Here is one example of three people and their (admittedly approximate) tax rates.

A poor person ("Oliver", named after Oliver Twist) earning $20,000 a year, pays 7.65% in social security and medicare taxes, which is $1530. I'll assume no federal income tax. Since it varies so much state to state, I must ignore state income and property taxes (which would likely be very low for Oliver) and sales tax (which, being regressive, would adversely affect Oliver). I'm also ignoring all tax credits.

A moderately rich person ("Professor Higgins"), earning $200,000 a year, pays roughly 2.5 times as much in federal taxes per dollar earned, 19%, which is $38,000 . In addition, Higgins would pay the maximum $6621 in Social Security Tax, and a full 1.45% medicare tax, $2900. Total taxes of $47,521, which is an effective rate of 23.8%. This ignore state taxes (Higgins may well be paying state property or income taxes) and all tax credits.

A very rich person making 2 million a year ("Warren") pays roughly 3.1 times per dollar earned, or 23.7%, which is $474,000, plus $6621 in SS and $29000 in medicare. Probably less in medicare cause some of this income is likely dividends, so I'll halve that to $15000. Total taxes of $495,621, for an effective tax rate of 24.5%. Again, ignoring state taxes etc...

When put this way, the system doesn't seem all that "progressive" in the top range. Warren pays basically the same rate (roughly 24%) as Higgins. I say raise the taxes on that Warren guy! (Fairness alert: in a very good year, I'm in that Henry Higgins range...) But seriously, it does feel that the top 1% could survive a modest tax increase. I am concerned that once the feds bump the top rates, states will follow up - Oregon is already considering an Obama-like "tax you more over $250,000" hike.

How about Higgins vs. Oliver? On the federal level, it seems fairly reasonable. If you factor in that the payouts for Social Security are progressive, my personal gut feeling is that Oliver is doing o.k. But, to test that, here is the same example, phrased two additional ways, since the exact phrasing has a psychological effect, especially where money is involved. I'm interested in how people think this affects the "fairness" aspect.

A) In a poor section of town are ten apartments, each with an Oliver. Combined, they earn $200,000, the same as Higgins. But they would pay total taxes of $15,300, roughly a third what Higgins pays.

B) In a poor section of town are thirty apartments, each with an Oliver. Combined, they earn three times what Higgins does. Yet they pay, in total, about the same taxes as Higgins.

To my mind, A still seems fair, but, for some strange reason (since it is really the exact same information), B makes me think that Higgins is getting a bit of a raw deal. How do others react?