Categorized | Taxes

36 Comments For This Post

1. Financial Samurai Says:
   October 13th, 2009 at 10:15 am |

   MLR – Good to see you pick up the discussion. I think I’m all debated out though! A good point was made regarding the UBER rich b/c of the 15% tax on dividends.

   I think we need to ignore the billionaires of America, b/c realistically 99% of us will never get there.

   Instead, I’m talking about those making $300,000-$1 million / yr, which is a common income for many people in the big cities of NYC, San Francisco, etc. Obama calls anybody making $200,000 rich in America.

   These 300K-1mil people may sound rich to a person only making 80K, and they most certainly are in some circumstances depending on how long they’ve been making this income. But many of these people are fresh out of business school, or 8 years of med school and are just starting out their careers and haven’t had any chance to build wealth b/c of their studies and student debt.

   Taxing these folks progressively is discrimination and plain wrong.

   I don’t get how you can add in state taxes, b/c 7 states in America have zero state income tax. We need to purely focus on the federal income tax rate.

   If you add about big numbers and average them out, you will always get a handsome average where most people sit. It’s the Bell Curve principle.

   Yes, the absolute dollar in tax is greater, but I’m still talking about the effective tax rate, which is much higher for someone making $500K as it is for someone making $100K.

   FS
   Financial Samurai´s last blog ..Slapping Hands With Famous People, Saving Money At Events & Priceless Moments

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   MyLifeROI Reply:
   October 13th, 2009 at 10:51 am |

   @Financial Samurai,

   Please show how you are coming to that conclusion.

   The data shows that the people making $500,000 per year are not paying a higher effective tax rate than people making $100,000 per year. (Or if they are, possibly only a few tenths of a point higher)

   You say “Let’s just look at federal income tax” but that is NOT the complete picture. There are a lot more taxes than that, and as the data above shows, the local and state taxes are far more regressive.

   You can’t say “Hey, let’s just frame the debate so that the numbers favor the side I agree with.” If you want to talk taxes, then we will talk ALL taxes. Because at the end of the day, that’s what really matters… how much money are people left with after the federal, state, and local governments shake us down.

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   Financial Samurai Reply:
   October 13th, 2009 at 6:13 pm |

   @MyLifeROI, we can’t include all taxes b/c millions of people who live in 7 states don’t pay state income taxes, yet the federal tax has a reach over technically ALL americans.

   Again, if you average enough numbers, you will ALWAYS get a bell curve where the majority of people will pay the same (70% usually).

   The proof I have is simply my own 1040 statements, where the effective tax rate is much higher the higher one’s income. I can shoot you a personal e-mail later and tell you want they are, b/c it’s not kosher in my eyes to reveal my income. :)

   If you have had income fall into every single marginal tax bracket and much beyond $373,000 for the 35% federal rate you will see the higher effective tax without a doubt.
   Financial Samurai´s last blog ..Slapping Hands With Famous People, Saving Money At Events & Priceless Moments

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   MyLifeROI Reply:
   October 13th, 2009 at 7:03 pm |

   @Financial Samurai,

   I still don’t see the issue. What you said about a bell curve always being the same with enough data points does not make sense, statistically. What you will get is a smaller standard deviation, a more accurate mean, and a tighter confidence interval within each income group. You aren’t averaging the WHOLE population because that wouldn’t tell you anything.

   If you take Group A (one income bracket) and Group B (another income bracket) and average their numbers independently, you will get a group specific bell curve. The bell curve will tell you a few things:

   1) 68% of people in that bracket are 1 standard deviation from the mean. 95% are 2 and 99.7 are 3 (standard deviations away).
   2) You can run a statistical significance test if there is a difference (is this statistically significant or could it have happened by chance?). With such a high n (people/data points), I would put money on the results being statistically significant.

   The people in the states without income taxes are being accounted for in the data. You can’t just use federal income tax data because there are millions of people in the country who pay the regressive sales tax, payroll tax, and property tax.

   If what you say is true, and you do in fact pay a much higher effective tax rate.. here is my thought process:

   1) You are not the norm. You, for some reason, must pay higher taxes (lack of deductions?). The average person in your income bracket pays a lower effective tax rate.
   2) You are only looking at federal income tax (as I can only assume from your reference of a 1040 statement as proof). As I mentioned, and the table clearly shows, if you are JUST looking at your federal income tax, you will see what appears to be a progressive tax. However, it is not until you account for the state/local taxes that you actually wind up paying the same effective tax rate from income bracket to income bracket. Those are all regressive taxes that are easier to ignore despite their huge effect on lower-income and middle-income earners.

   I’m thinking #2 is true, can you confirm? Because if that’s the case, I can see where you are coming from. Your federal income tax is DEFINITELY rising as you make more money. However, you are not accounting for all of the other taxes, and probably aren’t accounting for capital gains income which is taxed at a lower rate.

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   Financial Samurai Reply:
   October 13th, 2009 at 9:01 pm |

   @MyLifeROI, You can only deduct up to $1million of mortgage interest indebtedness, so let’s say you have a 6% mortgage, you can only deduct $60,000 off your income. That doesn’t help much if you make $700,000 for example.

   For your point #2, when I say my effective tax rate, I’m including ALL tax. It is already evident the federal tax rate is progressive just by looking at the rising percentage for rising income brackets.

   Just trust me on this one. If what you say is true on “everybody pays the same effective taxes” after $50,000, then there would be NO DEBATE and movement to push for a flat tax!

   I hope this site makes you massive bucks, so you can come back to me when you make over $500,000 and tell me whether your belief still stands :)
   Financial Samurai´s last blog ..Slapping Hands With Famous People, Saving Money At Events & Priceless Moments

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   BILLY79 Reply:
   November 9th, 2009 at 11:49 am |

   @Financial Samurai,

   “If what you say is true on “everybody pays the same effective taxes” after $50,000, then there would be NO DEBATE and movement to push for a flat tax!”

   You honestly think that if rich knew this they would just say screw it and still not want lower taxes? A lot of corporations America lately has proven that greed overrules reason or compassion every time. Even if the bottom 99% paid 90% tax rates and top 1% only paid 5% the top 1% would still say they pay too much in taxes and spend millions legally bribing(campaign contributions/pacs/527’s) our congress to get their 5% rate lowered. What many forget is that top 1% got there on the backs of the bottom 99%.

   

   janice Reply:
   November 17th, 2009 at 12:24 am |

   Here is reality for many intelligent, worthwhile, non-douchebag yuppie Americans:
   I’ve been earning under 15,000 a year my entire life with the exception of one year when I made just over 20,000 because I invested a small inheritance in education and equipment for my industry at the time. The equipment became obsolete so my industry became service again (coffee, pizza, wiping butts). To say that a person earning over $200,000 a year is not rich is wrong if not a very mean lie.
   In any city in the US, including NYC and San Francisco, anyone can easily find a room in a shared apartment for $12,000 a year. Even if such massive incomes were taxed 30%, $12,000 is well under 10% of their annual income of $200,000. I on the other hand, earning gross $12,000 a year cannot possibly find any indoor dwelling in a city or the deep woods for less than 25% of my annual income. more than 10% of my annual income goes to state and federal taxes if I fill them out properly, as I cannot afford a tax attorney or accountant, and about 25% is witheld and I have to do confusing paperwork with no training and no outside help to get some of it back the following year! Another 6.25% (sales tax) of the money I spend is gone (I have nothing left at the end of the year so that takes in what the filthy rich who manage to save $300 a year call “disposable income”), and that’s about 5% of my total yearly income. About a third each of my income goes to renting a room in a shared apartment in a farflung neighborhood I don’t like, and to owning and maintaining a car so I can get to my job 20 miles away, and occasionally visit with old friends. Every year I can expect a quarter dollar raise.

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   Financial Samurai Reply:
   November 17th, 2009 at 6:34 am |

   @janice, I only make $10,000 a year, so I agree, anybody making over 200k is a douchebag! That’s why we poor folks who earn below the poverty line of $25k/yr shouldn’t have to pay any taxes! Fight on!
   Financial Samurai´s last blog ..The Katana: Favorite Posts of The Week Ending 11/15

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2. Donnie Says:
   October 13th, 2009 at 10:21 am |

   Very informative post. I wonder how this works out inter-generationally when you include the estate tax on estates over $2M. Maybe the estates of top 10% get hit really hard at their deaths by taxes that those in the bottom 80% will never have applied to them. I agree with the idea that the tax system is not as progressive as people think, but I’m just curious about that aspect of it.

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   MyLifeROI Reply:
   October 13th, 2009 at 7:20 pm |

   @Donnie,

   Great question!

   I’ll keep it in mind as I browse through data at different think tanks websites.

   It seems like it is a niche kind of data, though, that is only pulled when people need it for a particular reason.

   Hopefully someone will come by here who has incite into this aspect of the equation!

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   Credit Card Chaser Reply:
   October 14th, 2009 at 6:40 pm |

   @MyLifeROI,

   There are many other taxes that come into play at higher income levels throughout all points of life. Some of these include estate taxes (the so called “death tax”) that are in the 50% (yes 50% range), gift taxes, GSTT (Generation Skipping Transfer Tax), etc.

   In response to the now famous Warren Buffet comment it is important to keep in mind that Buffet holds almost all of his wealth in investments where the maximum 15% long term capital gains tax applies so his massive investment portfolio obviously skews that number down.

   The one major thing that really distresses me is that if I had to choose who to incentivize with lower taxes: people like Warren Buffet who create many of our jobs and will use the money they saved by not paying taxes to build new factories, start new businesses, and create more jobs or the average lower income person who will use their savings from not paying more taxes to buy a big screen TV then I would have to lean towards the Buffet category.

   While both groups of people give some benefit to society in that the rich start companies and hire people so that there are more jobs for all Americans and the lower income people spend money on consumer goods like TV’s and automobiles I would have to say that for the most part only one category actually CREATES something of long term value that helps all of us long term and that would have to be the rich (not all rich of course but most of them that have started businesses, hired workers, invented new products, etc.).
   Credit Card Chaser´s last blog ..CBS News: Credit Card Companies are like “Legalized Drug Dealers”

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   Roger Reply:
   October 15th, 2009 at 11:26 am |

   @Credit Card Chaser,
   With apologies to MLR for stealing his blog for a bit, I’m going to try to field some of your concerns. To start, yes, there are other taxes that come into play at the higher levels (which, by the way, ARE included in the percentages listed in this article, according to the linked report), but there are plenty of taxes that only affect the less well off (Social Security payroll taxes) or benefit the rich to a greater extent (long-term capital gains taxes). When those are considered, as well, the distribution of tax burden looks pretty much as MLR described it.

   You also talk about Warren Buffet pulling the average taxation of his income bracket down as if he was the exception rather than the rule. Most of the people in the richest tax bracket also make much, if not most, of their income via investments rather than working for pay, and any tax system that discounts the taxes paid on said investments is obviously going to favor them more than those whose work for pay income makes up the bulk of their income.

   As for comparing who we would rather give tax incentives to, Warren Buffet or the ‘average’ lower income person who’d spend it all on a flat screen TV, I barely know where to start. First, you’re obviously making a false dichotomy to justify your particular view. Of course most people would say to give more tax relief to Warren Buffet; if the choice was between, say, Paris Hilton and a hardworking small business owner, you’d get a much different response (something in the neighborhood of ‘Tax the no-talent witch within an inch of her trust fund-fueled life’, I’m guessing). For a more emotionally neutral comparison, try this: if you asked who should pay a higher percentage in taxes, the guy making 100k a year or the one making 1.4 million, you’d almost certainly get more people saying the former (or saying they should pay the same rate, at least), but as MLR’s chart shows, that’s just not the case.

   Second, and I’ve said this before elsewhere, you need to think about utility, the ability of more income to meet more of a person’s needs. If we try to take more from the lower income people, you’ll hurt their ability to provide for themselves much more than if you take the same percentage from richer people. If we take an additional ten percent from someone in the middle of the income distribution, we’ll reduce his or her ability to provide for his or her needs and wants much more than if we take the same percentage from someone in the top one percent. Yes, the dollar amount is much greater in the latter case ($144,000 versus $4000), but the difference in behavioral effects is vast; the middle income person will have to cut back significantly, perhaps even delaying starting a business (or other venture that would add to the wealth of the world) of his own, while the person making over a million each year might barely notice the difference. Taking more money from the people who can most afford it (according to the relative utility of the money to each of them) just makes sense.

   Third, under your plan to tax the rich less, you’d be rewarding those who already made it rich, while punishing those are trying to become rich. Bear in mind that mixed in with those ‘average’ lower income people are the future Bill Gateses and Warren Buffetes of the world; motivated, dedicated people who, if they are allowed to flourish, could make drastic changes for the better in the world and derive a huge profit in the process (that is, CREATE long term value, to use your phrase). Taxing them at a higher rate will just make it harder for them to succeed, while lowering the taxes for the rich will have a minimal effect on their drive to change the world (as just mentioned, the utility of money for higher income people is going to be so low that money will barely serve as an incentive). IF (and that’s one big IF) we are trying to design a tax system that leads to the greatest benefit to society, we shouldn’t be rewarding those who have already made their contributions, we should arrange things so that future society benefactors can have the easiest time starting to make their mark.

   Finally, I’d argue that the average lower income person’s consumer spending is at least as important to benefiting society as the average rich man’s investments. By choosing goods and services that provide him with the best return on his spending, the average man (or rather, average men and women in aggregate) will choose which companies get his spending dollar, and by extension, which companies will grow and which will fail. This money will continue to work its way through the system, touching more people’s lives than the money of a rich man that is locked up in investments. Even if the lowest income people don’t directly employ others, their money will soon enough be in the hands of companies and individuals that will.

   Alright, that’s enough from me; I’ve been writing comments longer than my posts lately.
   Roger´s last blog ..Weekly Thoughts: Bittersweet Credit Card Moment

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   janice Reply:
   November 17th, 2009 at 12:39 am |

   Warren Buffet is not building factories for you to work in.
   Nobody is building factories for you to work in in the US.
   Everything is backwards and wrong and outsourced. We need to get together and make sure a good chunk of our tax dollars are used to invest in small businesses in America, by Americans like me and you. And to make sure the infrastructure is strong, the workers are healthy and educated, and that people everywhere are healthy, inspired, happy and secure enough to buy what we make in the factories and pay a good price for American quality, and that what we make is good and safe and awesome so that people will seek it as the best stuff in the world.

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3. kosmo @ The Casual Observer Says:
   October 13th, 2009 at 2:31 pm |

   The fact that these folks are paying 17% effective rate is partially due to capital gains dragging things down.

   I’m also curious to see what the average for each of the deductions is. Of particular interest in the foreign tax credit. The effective US rate might be 17%, but some of the income may be from foreign sources and has already been taxed in the source country. I suspect that this is more of an issue with the rich than with the non-rich :)

   Regarding the distribution of income levels,I recapped this (using IRS data) many months ago -> http://www.observingcasually.com/how-many-people-make-more-than-250000-per-year/
   kosmo @ The Casual Observer´s last blog ..Where Does a Baseball Fan Go in the Offseason?

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   MyLifeROI Reply:
   October 13th, 2009 at 7:25 pm |

   @kosmo @ The Casual Observer,

   It’s definitely due to capital gains bringing things down. That is what a lot of people forget — the incredibly wealthy don’t get paid 8-5. They get paid dividends from their investments.

   In re: to the foreign tax credit, that is another great question! I did a quick search on this and couldn’t find the data.

   This is another thing I will keep in mind and look for when I get a chance!

   Good recap on your site, I read through it and that was a good idea. A lot of analysis out there is so convoluted with political rhetoric. It’s good to see people just throwing the hard data out there for more people to view.

   Thanks for your participation in the discussion.

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   Dana Reply:
   October 19th, 2009 at 12:44 pm |

   @MyLifeROI and Cosmo,

   Don’t know if this helps, but I worked abroad for a couple years, and when filing my tax returns here in the states I had to declare any foreign earned income above (if I remember correctly) $89,000. This was a few years ago, 2005-2007, so the rate might be a bit higher now. The amount earned above $89k was taxable.

   Interesting discussion. I have often wondered why Capital Gains income is not taxed at the same rates as any other income. But I mean income that you use, not that just goes back into investments. Example, if you deduct $45,000/year from your investments to live on, get taxed at the ~16% rate. If you deduct $100k/year to live on, get taxed at the ~28% rate.

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   Kosmo @ The Casual Observer Reply:
   October 19th, 2009 at 3:44 pm |

   @Dana, – We’re talkig about two slightly different things in regards to foreign income. I’m referring to a taxpayer who was a fulltime resident during the year, but has foreign income. There’s a formula related to this – it’s not a straight dollar amount. I don’t have much familiarity with your scenario – a US citizen living abroad.

   Capital gains are taxed at a lower rate in an effort to encourage people to invest in capital assets. You should only pay capital gains if you actually sell the asset during the year. If I buy a stock that doubles from $100 to $200, I don’t have a taxable gain – until I sell the stock.
   Kosmo @ The Casual Observer´s last blog ..Why I Hate HSBC (again)

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4. Bernard Maldonado Says:
   October 14th, 2009 at 2:53 pm |

   I don’t claim to be an expert on any of the topics mentioned in this article: Taxation, Tax Brackets, or Tax collections from different econo-demographic groups in the USA.

   However, I do have an opinion about this discussion.

   1. I’m glad to see that the concept of ‘fairness’ is not plastered in this article. It is mentioned, but only as a ‘quote’. The world is not fair, the justice system is not fair, so why should taxation be fair.

   2. Taxation is not the only way wealthy people give back to society. Charitible gifts, grants, scholarships are all deductions before AGI is calculated. Couldn’t we call these payments something like “self-directed taxes”? After all, they are payments, period, that go to benefit others. Taxes (at least a portion) are directed to help other people. So to a degree, we could call charitable gifts taxes that are directed by the giver. If a land owner gifts a parcel to a school district to build a school, isn’t the amount they forewent more than the net proceeds after taxes paid on the land? – regardless of appreciation.

   3. I don’t think that the US Tax system will ever shift greatly. Why? Because it’s impossible to guarantee that the income to the government will be sufficient and they cannot afford to ‘try’ something. If shifts in tax collection are academic and not historically proven, then it’s too risky to ensure that enough is collected to cover expenses. What we have is what we have. It’s not perfect. It is what it is and the only way to experience a different tax system is to pick a country whose taxation you like and move there!

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   Financial Samurai Reply:
   October 15th, 2009 at 1:04 pm |

   @Bernard Maldonado, We have a spending problem, pure and simple. It’s the same from an individual perspective as well.
   Financial Samurai´s last blog ..Party Like It’s 1999! 10 Takeaways From This Recession

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5. ctreit Says:
   October 15th, 2009 at 8:26 am |

   Of course, if taxes were applied across the board the effective tax rate for high income earners would be higher. But capital gains taxes change the average. The famous hedge fund manager John Paulson once argued in Congress that this should not be changed since people like him would lose an incentive for the innovative ways in which they improve the financial system or something like that. Imagine he had to pay 38% instead of 15% on the more than 2 billion he made in one year. Gosh, I am sure that he would avoid making that much money the next year and he will leave us all with a less efficient financial system.

   Another interesting thing about this topic is the feelings it elicits among many people. Many people who are far away from the top income bracket are even upset with the high marginal tax rates. In all likelihood they will never encounter this problem in their lifetimes. Yet, they think that if the marginal tax rate is too high they will not even want to get to a higher income level. I find this very curious.
   ctreit´s last blog ..Net Worth Calculator says dealing with financial emergencies and surprises is easy

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6. The Biz of Life Says:
   October 16th, 2009 at 8:43 pm |

   So this is the CTJ’s best guess at 2008 effective tax rates, not actual facts… do I have that right?

   You know, if a guy like Warren Buffett really believes he should pay more in taxes, the IRS accepts donations. He can write an extra check every year.

   According to the IRS, the top %1 of earners pay 39.38% of federal taxes, top 5% 59.65%, top 10% 70.30%, top 25% 85.99%, top 50% 96.93%. That sure puts a different spin on things, doesn’t it?

   I’d support a flat tax if it were implemented in such a fashion that the first x dollars of income were exempt (say 40K, just to throw out some numbers), and everything after that was taxed at a fixed percentage (say 20%) with all deductions and loopholes eliminated.

   But the real question is just how much of anyone’s earnings do federal and state governments deserve? They get greedier and greedier every year.
   The Biz of Life´s last blog ..Quote of the Day: Marcus Tullius Cicero

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   MyLifeROI Reply:
   October 16th, 2009 at 9:20 pm |

   @The Biz of Life,

   No, the CTJ compiled the data. All of the states publish the data. It’s usually accessible through the CBO or various other sites like the Tax Foundation. Or directly from the source: the IRS and state agencies. Other things that may not be recorded by income group (like perhaps sales tax) can still be collected via statistical approximations.

   The federal income tax collections you mentioned are included in the above numbers. One thing you are not including in those numbers is the amount of taxable income each of those groups collects. You are also using the only progressive tax to try and prove a point. What is wrong with using the total tax burden?

   The fact that the federal government and state government get greedier and greedier every year is actually quite the “misnomer.” Local and state governments, as data shows, actually crowd the federal government out of tax collections. US citizens seem to have a max tolerance for taxes because historical data shows that tax collections rarely exceed 30% between the various taxing authorities. In the past decade we have seen an increase in local and state taxes and thus a decrease in federal taxes.

   You ask the right question, though, as everyone should: Do they deserve it? We may not agree line-by-line, and therein lies the issue.

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   Timmy Reply:
   October 17th, 2009 at 1:46 pm |

   @MyLifeROI,

   “What is wrong with using the total tax burden?”

   I’d say that using the total tax burden doesn’t take into account distinctions between where the money comes from, which is important. I think the government has a better claim on money that is associated with the purchase of goods than it does over the investments I make, or gifts I receive. It could be argued that the government provides services that allow me to work, such as providing roads for me to drive to work, education to get the job in the first place, fire department in case my office catches fire etc. But what services did the government provide that entitles them to a percentage of my investments, to say nothing of if my dad dies and leaves me his estate. (His income was taxed before he could buy anything, and the things he purchased had sales tax, why should the government get to stick its fingers in the pie again when he gives his stuff away?)

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7. Mike from Iowa Says:
   October 17th, 2009 at 10:36 am |

   I’m a Christian pastor, which under the IRS rules means I’m self-employed. That means 15% TAX for Socialist Security I will never collect on due to their bankruptcy. State and local sales tax, also inescapable, is 8%. And this does not include taxes on property to pay for “free education in a ‘public’ institution”, it does not include state taxes, it does not include federal taxes, it does not include “hidden taxes” on gasoline and other items, etc. By serving multiple churches at the same time, I have managed to make it *almost* out of the Second 20%. So your figure of a mere 22-27% of income going to taxes is laughably ludicrous. And your “fact” (fantasy) that US subjects (not citizens) don’t tolerate more than 30% total taxes has not been true since the 1980’s.

   I do not envy earned wealth. But I know that when a class-envy politician promises to “tax the rich”, that means the prices you and I pay will rise as they pass on the new tax costs to us. Socialism should be thrown on the scrap heap of history. Those who are working for government control of industry (fas cism) are making matters worse. The whole Keynesian Ponzi Scheme fails every time it is tried. While far from perfect, a flat tax on consumption is far more fair than the current Bush/Obama regime’s Rueben Goldberg mess. It encourages savings, helps people see long-term ideas (i.e., moving up in class), promotes investment in innovations, and the like. People still fail and problems still arise, but they are more manageable than those we suffer now.

   Mike

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8. ted Says:
   October 17th, 2009 at 5:13 pm |

   Wow. Including the payroll tax as a pure tax is so misleading its ridiculous. You know, you get something for the payroll tax, especially at lower income levels. The real return on Social Security for the 2004 cohort of extremely low income workers (payable benefits scenario, which includes a ~25% benefit cut beginning in 2041 for the latest SSA note, so it would be lower due to Trust Fund exhaustion occurring in 2036 under the last trustees report) range from 3.56-5.4 (so 6.56-8.4 nominal assuming 3% interest) with zero market risk. If you look at present law, you’re at 4.5 to 6.3 (8.5 to 9.3 nominal). These are for cohorts born in 2004, so anyone earlier is looking at significantly higher internal real rates of return. (http://www.ssa.gov/OACT/NOTES/ran5/index.html).

   Lets be honest about whats going on here, you can make statistics lie however you want, and the Institute of Tax Justice is a partisan organization. I didn’t have time to look through the ‘model’ they use, but perusing quickly the ‘non-partisan’ Institute of Taxation and Economic Policy’s website, their board of directors (Center for Budget and Policy Priorities and SEIU folks) doesn’t have me hold out much hope for an accurate model. I’d be interested to see a more detailed explanation of how they deal with things such as the EITC as well.

   Another question I have is where in the hell they get their data. They claim to be using 2008 data, but IRS online data is for 2007, and CBO’s effective tax rate data only goes to 2006 currently. It’s possible they got unreleased data (it’s not too difficult) but they don’t describe it.

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9. MattS Says:
   October 18th, 2009 at 5:07 am |

   I think the vital information missing from your post is what happens to the money after it’s taxed. There seems to be a knee-jerk assumption that money from taxes automatically will be spent in good and meaningful ways.
   The rich often don’t stuff their money in mattresses, ala Scrooge McDuck, but spend it or invest it. Statistics on government spending ROI indicate that the utility invested in government programs is less than optimal, if you ever saw a $1,500 Pentagon nut and bolt set.
   Another problem with the tax system is that it negatively impacts earners and investors.
   If you want to curb smoking, you tax cigarettes.
   If you want to curb drinking, you tax alcohol.
   So income tax, capital gains tax, and dividend tax are designed to???
   Even the recent proposal to tax financial transaction will add a fee to investing transactions, but not credit card transactions. What’s the message?

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10. Rob D Says:
    October 18th, 2009 at 8:05 am |

    Couple thoughts/questions

    1. I would love to see the average and median in tax rates for the different segments of income levels. I would guess that some super rich are paying very little while others get stuck with higher taxes.

    2. I would suggest reading Perfectly Legal – http://bit.ly/2DNgiv – great book explaining how the political donor class really gets one over on us.

    3. Regarding the self employment portion of SS, this comes up quite a bit that the company pays this portion, it’s all baked in.

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11. Leonard Says:
    November 16th, 2009 at 6:13 pm |

    Too bad many people in the top 400 percent get most of their income from dividends and capital gains not from actually salaries. These areas have only a 15% tax rate. The top 1% of US pays more than the bottom 95%. Hell, something close to 40% don’t pay taxes at all. I take home 52% after taxes and employee benefits. Then I give them salaries after that. With a president like this, it is no wonder that people would prefer to take from the wealthy and be an advocate of higher taxes on the wealthy. Thanks but you have to realize something, when we leave to find some other place where we can make and keep our money, and not give it to those who leech off an ineffective government, we take our money and jobs with us. Higher taxes hurt small business and that hurts employment numbers and prices and ultimately hurts everyone.
    This was once a land of opportunity where people would have a dream of becoming rich and allowing your family to live comfortably and set themselves a higher goal. Now it seems this is becoming a land of entitlement. If you want money, don’t ask for it. Earn it.

    [Reply]

12. The Republic Says:
    December 20th, 2009 at 2:02 pm |

    To those extremely low income earners, you need to get off the sofa and educate yourselves about federal taxes. Most likely, you didn’t even need to file and if you did, after deductions, you should have had every dollar returned to you. You are either doing something wrong or you are lying to us about your situation. Out of the 132 million tax returns, 44 million will legally and correctly ask for every dollar back. 14 million didn’t even have to file, you should be one of them.

    I’m not a Bush fan or anything, but it’s only fair to point out that when everyone was complaining about all of his so-called tax cuts for the rich, he more than alleviated taxes for the poor. He doubled the amount of zero income filers during his presidency to almost 50 million Americans. That’s right; he doubled the amount of Americans who pay absolutely nothing in federal income tax. More than a third of Americans now get all of their money back. How can they complain? Some of these people actually get more money back than was taken out; they get paid to be citizens.

    One more thing, allowing the politicians to prey upon your weaknesses by inciting your class hatred of the rich actually ends up hurting you more. They have whipped you into a frenzy and with that, you give them your blessing to take from the rich all they can steal. In return they take just a small amount from you and a little more control. The problem here is that you have nothing to give. The rich can be taken from and will survive in the end, but you, you are poor beyond words and even a little can tear your whole world apart. You now have nothing but what the government allows you to have. And so it goes, as in with all governments throughout history, you have sowed the seeds of this countries undoing.

    “Despite a voluminous and often fervent literature on “income distribution,” the cold fact is that most income is not distributed: It is earned.”

    [Reply]

    

    Nicole Reply:
    December 30th, 2009 at 7:51 pm |

    @The Republic,
    It’s always easy to point fingers at people who do not have isn’t it? It’s easy to assume that someone who goes to work everyday, pays their taxes and tries to make an honest living is lazy and ignorant. It is easy to say, go educate yourselves and make more money. And it seems to be a common thought among “those” extremely high income earners, that we lower and middle income peoople should be ever so grateful to you “Gods” who so mercifully bestow jobs upon us. You have no idea what it is like to work 60 hours a week at two jobs to take care of an 80 year old grandmother who worked from the time she was 12 years old until she was 70 and only receives $700 per month in social security benefits. And of that $700 about $550 goes to medication because our healthcare system is an abomination. I’m 25, single and I don’t have children, so NO, I don’t get all of my tax dollars back. You talk about your taxes and how you have to pay out in taxes what many people don’t make in a year, no matter how much they work. If I had to guess, I would say you have never done one hard days work in your whole ungrateful life. Get over yourself. Because when it all comes down to it, we are talking about quality of life and how money plays into that. I make a little less than $35000 a year busting my ass. I don’t get handouts and I don’t ask anyone for anything. So don’t assume that just because someone does not make six figures and may not be as educated about tax laws as they should be, that they are sitting around on the sofa. The fact of the matter is that most of us are too busy busting our asses trying to build a life, to spend hours on end learning tax law, or even thinking about the lives of the super rich. I don’t hate anyone who has more than me, just like I don’t hate anyone who has less than me. I also do not blame anyone else for the things in my life that are not the way I want them to be (you could take a page from that book because you seem hell bent on blaming the less fortunate for bringing down the rich). So stop playing the victim, because we people who are “poor beyond words” don’t feel the least bit sorry for you!

    [Reply]

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    April 21st, 2010 at 7:30 am |

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    [Reply]

15. stanooch Says:
    May 2nd, 2010 at 3:49 pm |

    The top federal individual income tax rate was not “lowered” to 70% until 1965. Throughout the 1950s and 1960s, the United States started the interstate highway system, put men on the Moon, and had an extremely robust economy. How was that able to be accomplished with a top tax rate of 70%? Investment money stayed in the US to build US factories to hire US workers to make “Made in USA” products to be purchased in US stores with US paychecks.

    There are those who say we should allow the wealthy to keep an inordinate amount of their income as opposed to the lower wage workers who actually sweat to produce that wealth. As far as the asinine statement “A poor man never gave me a job,” neither will a poor man close a US factory making US workers unemployed, thereby ending US paychecks to be spent in US stores on made in US products and give your job to a Mexican making $6 a day while you collect unemployment (for however long it lasts).

    [Reply]

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   [...] skinny on taxes By Brian Hayes Taking into account federal income tax, payroll tax, state income tax, property tax, and various other local taxes, [...]

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