The insanity of our tax code

Imagine a family where the father earns $100K, they have three children, and the wife takes classes at a local college and spent $10K on tuition and other related expenses. They have $15K in mortgage interest, $4K in property taxes, and $2K in charitable deductions.

The income tax for that family in 2009 would have been $2,540. That's right, by jumping through a bunch of hoops, a person who makes $100K can have an effective tax rate of 2.5%.

It gets worse. If he works really hard and manages to earn an extra $25K, making his total income $125K, their taxes skyrocket to $11,027. That's an additional $9K in taxes for an extra $25K in earnings. That's almost 36% tax on that last $25K, even though our highest tax rate is 35%.

Insanity.