I'm not an accountant, just a business owner who does his own taxes.

There is no 40% bracket in the US. The highest is 37%, and it kicks in when you, as a single person, make $523601 or more.

what u/BabooTibia is saying is that total tax of SECA Federal Income State income tax can easily add up to 40%, and that's true.

If this guy turned $300 in pure profit every day, 365 days/year, he'd make $109,500/year, and only be in the 24% tax bracket, which kicked in starting with the 86,376th dollar he made.

His total income tax would be $17,384, or about 15.88% of his income.SECA would be 15.3% of his income

That's 31.18% in just federal taxes, before state tax is factored in. In Florida, it would hold at 31.18%. In Manhattan, he'd be paying 5.47% effective state tax and 3.48% effective municipal tax, bringing his total tax bill up to 40.13%

This assumes no deductions or credits, so is probably not what his actual bill would be.

All that said, the "extra taxes" of owning your own business probably do not apply to a guy owning a hot dog cart. He most likely set up his business as an LLC or S-Corp, which allow him to do simple pass-through accounting and not have to pay both business and personal taxes. If he owned an entire fleet of hot dog carts, with multiple employees, then he'd have to pay some added business taxes, but they'd be spread out over a larger profit base. As it stands, the only "added" tax here as compared to being paid a $109,500 salary is the employer's half of FICA, which is 7.65% of gross income. If he were receiving that same amount as salary, his employer would pay half of his Social Security/Medicare tax, still leaving him with 32.48% in taxes. So the tax jump from "working for the man" to "owning a hot dog cart" is not incredibly significant.