From 1940 to 1963, the top marginal income tax rate in America was between 81% and 91%. Today's federal rates on even the highest earners are much lower. However, with the help of state and local governments, high-income investors can end up forfeiting 60%, 70% or even more than 80% of their profits from the time they're generated through the moment they're spent.

Here's how to create the perfect storm of taxes.

Step 1: Move to New York City and make $500,000.

That way, you'll set yourself up to pay a combined state and local rate of 12.62% on any additional income, one of the highest rates in the nation. State and city tax rates can be deceiving because of the way payments are offset by reductions in federal taxes, but those benefits have been eroding for years. According to E.J. McMahon of the Manhattan Institute, in the 1970s the top local and state tax rate for New York City residents was an astonishing 19.65%, but the effective rate after accounting for deductions was 5.9%. In 2011, he reckons the 12.62% tax burden on top-earning New York City residents will be the equivalent of 9.9% after deductions.

Step 2: Invest your savings in shares of a large, prosperous American company.

The fruit of your investment -- profits earned on your behalf by the company -- will be taxed plenty. Over the past five years, the median tax rate for S&P 500 members -- the nation's largest 500 companies by stock market value, more or less -- was 32%. The highest marginal rate, however, is 39.1%. That's a 35% federal corporate tax, plus an average of 4.1% for states. It's the highest top rate for any developed country save Japan.

Step 3: Wait until 2011.

You'll see why in a moment.

Step 4: Collect dividends.

Dividends are how companies distribute profits to their owners, the shareholders. Of course, the owners are already taxed once in the form of corporate taxes when profits are earned. Taxing them again when profits are received seems unfair. That idea has occurred to Congress in the past. In 1986, the legislature ordered the Treasury to study an integration of the corporate and individual income taxes, according to a recent policy paper by the Tax Foundation, an advocacy group. The Treasury study, released in 1992, recommended as the simplest approach a tax exclusion for dividends that have already been taxed as corporate income (similar to what the U.K. and Canada do today). President George W. Bush proposed just that in 2003, but secured only a reduction in the dividend tax rate, to a maximum of 15%.

That deal expires at the end of 2010, however. Without action by Congress, dividends beginning next year will be taxed as ordinary income, just as they were before 2003. In fact, they'll be taxed a little more. The Patient Protection and Affordable Care Act, signed into law by President Obama in March, increased Medicare taxes and extended them to all income, not just earned income. That includes dividends.

Math break

Under the conditions described so far, if the company you invest in earns $100 on your behalf and wishes to send it to you as a dividend, you'll end up with $28.44. How's that? Corporate taxes at the maximum federal and average state rate will take $39.10. From the $60.90 that's left, federal dividend taxes will take $24.12; state and city taxes, $6.03; and Medicare taxes, $2.31. That leaves $28.44.

Of course, money's value is only realized when it's spent. The chances are good that whatever you pay for will have at least a sales tax, and it might even have a special tax of its own.

Step 5: Buy cigarettes (or pay your cellphone bill).

New York State recently increased its cigarette tax to the highest rate in the country -- $4.35 a pack. New York City grabs another $1.50. Don't forget the 8.875% sales tax. Assuming a pack costs $11, that's a combined 57% tax. What started as a $100 profit earned by your business is reduced to $12.23. That's a start-to-finish tax of more than 87%.

Don't smoke? Pay your cellphone bill instead. A New York Post analysis of city phone bills last year found 11 federal, state and city levies that add 21.2% in taxes to a $50-a-month plan. That means your $100 profit leaves you with $22.41 in spending power, a reduction of more than 77%.