Tuesday, August 14, 2012
One of my readers was watching a Twilight Zone episode (The Man in the Bottle) in which a tax issue arose. A genie granted a man four wishes. One of the wishes was for $1,000,000. The couple gave $57,355 to friends. Then an IRS agent showed up and in 60 seconds calculates a federal income tax liability of $942,640 (leaving the man and his wife with $5). The agent says that he is using the standard deduction and married filing jointly rates. The episode aired in 1960. Time travel exists in the Twilight Zone. So, the reader wants to know, in what year did the wish get granted? To quote the reader, “In other words, can you recreate the tax liability [as computed by] the IRS agent?” The reader says he has tried tax years 1913-1960 without success, and asks, “Is it possible the IRS agent was wrong?”
Then I tried. It’s a roughly 95% effective tax rate. Even in the World War II years, with top marginal rates in the 90s, I don’t think one could get to a 95% overall rate. My guess is that the screen writers wanted to make a shocking outcome! Tax is Everywhere, Even in the Twilight Zone.