9 Things The Rich Don't Want You To Know About Taxes

[guido911]

Ok. BTW, what portion of that %47 are never going to go without a meal?

Who cares? That's not the instant issue. I am talking about those paying little or nothing declaring the "rich" aren't paying enough and demanding they do. According to Obama, everybody was going to have to have some skin in the game. Plainly, almost half of us do not. Again, is it fair that 47% pay no fed income taxes?

[Cats Cats Cats]

Yeah, the 47% should be paying in.  You are making the assumption that that 47% doesn't include some major corporations.

[guido911]

You are making the assumption that that 47% doesn't include some major corporations.

That's an interesting point, especially after the GE revelations. I wonder who these corps are and how many. I can tell you my little corp paid...

[Teatownclown]

Those that seek to make millions can afford to let their wealth grow without income distribution. What % of 47 includes the one's who can afford not to pay taxes?

[guido911]

What % of 47 includes the one's who can afford not to pay taxes?

Why does that matter? Half our country pays no federal income tax and you seem more interested in why rather than why not? I am going to ask for the last time, is it "fair" that 47% of this country pays no fed income taxes? Sheen showed fortitude and answered.

And, is it right that those paying nothing demand that those paying should pay more?

[Cats Cats Cats]

Why does that matter? Half our country pays no federal income tax and you seem more interested in why rather than why not? I am going to ask for the last time, is it "fair" that 47% of this country pays no fed income taxes? Sheen showed fortitude and answered.

And, is it right that those paying nothing demand that those paying should pay more?

Is it fair?  No.  What would happen when you take the bottom earners and tax them more?  The spend less and blow up our consumer based economy. 

[Red Arrow]

Those that seek to make millions can afford to let their wealth grow without income distribution.

I seek to make millions (of $) but have not been too successful.

[Red Arrow]

Is it fair?  No.  What would happen when you take the bottom earners and tax them more?  The spend less and blow up our consumer based economy. 

Fortunately, when the rich are taxed more, they spend more to make up for it.

I remember hearing stories of when taxes were raised on things like really big yachts that the rich immediately placed more orders for yachts.  This in turn caused the US yacht makers to hire more skilled yacht builders.  And so on...

Well, maybe not.

[Cats Cats Cats]

That's an interesting point, especially after the GE revelations. I wonder who these corps are and how many. I can tell you my little corp paid...

You know this has been going on for a while now.  Look at Haliburton using their offshore subsidiaries to do business with Iran, etc.

[we vs us]

Why the focus on income tax?  That tells you very little about the actual tax burden of those 47%.  Your suggestion that, because they don't pay income tax, those folks somehow don't contribute to the well being of the country is just flat wrong.  These people still pay sales tax, property tax, sundry state and local taxes, and fees of all sorts.  They also pay payroll taxes, which support Medicare and Social Security.  Also unemployment insurance.  Etc. 

At the same time, even though we think of "the poor" as taking more advantage of the services of the state, it's the rich who benefit most. Not as much from the social safety net, but definitely from the infrastructure investments that the government makes.  How would business prosper, after all, if we didn't have roads, or rails, or airports, or ports, or energy infrastructure, or etc etc.  There's also government subsidies and grants; tax credits and other incentives to invest.  And how then would the top 10% make their lightly taxed income off capital gains, which are, in essence, the fruits of successful business?   

The point is that we all contribute to the state, and we all benefit from it.  The state helps keep the poor alive; the state helps the rich prosper. 

[guido911]

Why the focus on income tax?  That tells you very little about the actual tax burden of those 47%.  Your suggestion that, because they don't pay income tax, those folks somehow don't contribute to the well being of the country is just flat wrong.  These people still pay sales tax, property tax, sundry state and local taxes, and fees of all sorts.  They also pay payroll taxes, which support Medicare and Social Security.  Also unemployment insurance.  Etc. 

The "rich" pay all those same taxes as well, and at a higher rate, in additional to income tax. So what's your point? And incidentally, all those taxes you listed combined would amount to about 10% of what the rich people I am talking about pay in the real heavy federal income tax.

As for using the infrastructure, I work from my house and my wife drives to work 3-4 days a week. Does that sound like I am using up the infrastructure? How about you? Your problem is similar to many on the left. Not all "rich" people are international corporations. Many are your neighbors that just happened to work hard and sacrifice to become successful.

All I want is the bottom feeders and non-income tax payers to shut the heck up when it comes to the rich having to pay more. Seriously, can anyone explain to me how those folks have the gonads to complain? And why should I have to pay while almost half of us do not?

[JeffM]

From the actual article cited.....
http://www.wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html

Data from the Tax Foundation show that in 2008, the average income for the bottom half of taxpayers was $15,300.

This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax-free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

The Internet is awash with statements that the top 1 percent pays, depending on the year, 38 percent or more than 40 percent of taxes.

It's true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008 (the most recent year for which data is available). But people forget that the income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government.

Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners.  That's because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.

When Reagan was elected president, the top marginal tax rate (the tax rate paid on the last dollar of income earned) was 70 percent. He cut it to 50 percent and then 28 percent starting in 1987. It was raised by George H.W. Bush and Clinton, and then cut by George W. Bush. The top rate is now 35 percent.

Since 1980, when Reagan won the presidency promising prosperity through tax cuts, the average income of the vast majority—the bottom 90 percent of Americans—has increased a meager $303, or 1 percent. Put another way, for each dollar people in the vast majority made in 1980, in 2008 their income was up to $1.01.

Those at the top did better. The top 1 percent's average income more than doubled to $1.1 million, according to an analysis of tax data by economists Thomas Piketty and Emmanuel Saez. The really rich, the top one-tenth of 1 percent, each enjoyed almost $4 in 2008 for each dollar in 1980.  

The top 300,000 Americans now enjoy almost as much income as the bottom 150 million, the data show.

But thanks, Republicans, for coming up with a tax plan that will screw the poor/working poor/lower middle class out of medicare and medicaid, the programs payroll taxes are used to finance...

President Reagan signed into law 11 tax increases, targeted at people down the income ladder. His administration and the Washington press corps called the increases "revenue enhancers."  Reagan raised Social Security taxes so high that by the end of 2008, the government had collected more than $2 trillion in surplus tax.

George W. Bush signed a tax increase, too, in 2006, despite his written ironclad pledge never to raise taxes on anyone. It raised taxes on teenagers by requiring kids up to age 17, who earned money, to pay taxes at their parents' tax rate, which would almost always be higher than the rate they would otherwise pay. It was a story that ran buried inside The New York Times one Sunday, but nowhere else.

In fact, thanks to Republicans, one in three Americans will pay higher taxes this year than they did last year.

First, some history. In 2009, President Obama pushed his own tax cut—for the working class. He persuaded Congress to enact the Making Work Pay Tax Credit. Over the two years 2009 and 2010, it saved single workers up to $800 and married heterosexual couples up to $1,600, even if only one spouse worked. The top 5 percent or so of taxpayers were denied this tax break.

The Obama administration called it "the biggest middle-class tax cut" ever. Yet last December the Republicans, poised to regain control of the House of Representatives, killed Obama's Making Work Pay Credit while extending the Bush tax cuts for two more years—a policy Obama agreed to.

By doing so, Congressional Republican leaders increased taxes on a third of Americans, virtually all of them the working poor, this year.

As a result, of the 155 million households in the tax system, 51 million will pay an average of $129 more this year. That is $6.6 billion in higher taxes for the working poor, the nonpartisan Tax Policy Center estimated.

Of course, why not just end the Earned Income Tax Credit for all those "deadbeats"?

Well...... there you go again.... Ronald Reagan called the tax credit "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

[Red Arrow]

Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners.  That's because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.

How much more Social Security benefits will Warren Buffet get than the guy who only made $106,800?

Edit:

Reagan raised Social Security taxes so high that by the end of 2008, the government had collected more than $2 trillion in surplus tax.

How much of that surplus came from raising the cap on the amount of salary/wages subject to Social Security?  In the late 70s/early 80s, the cap was somewhere around $20,000.  Reagan had that limit raised.

[JeffM]

I don't think Warren Buffett cares much about the taxes he pays on his first $106,800.......

http://www.freakonomics.com/2008/05/01/taxes-warren-buffett-and-paying-my-fair-share/

So that got me to thinking about how fair the tax system really is. Do the well-off pay their fair share, or do they also deserve a tax break?

Well, let's start with the ultra-rich. Bajillionaire Warren Buffett has argued that he isn't being asked to pay his share. He went around his office, asking people what share of their income they pay in income taxes. Buffett's 17.7 percent tax rate compared a bit too favorably with the 30 percent tax rate paid by his secretary.

So it appears that the tax system favors the super-rich over working stiffs.
And Buffett went a step further, putting his money where his mouth is. Last November he issued a challenge to his fellow billionaires:

I'll bet a million dollars against any member of the Forbes 400 who challenges me that the average (federal tax rate including income and payroll taxes) for the Forbes 400 will be less than the average of their receptionists.

So far, no-one has taken him up on this bet.

What about those of us who are merely among the well-off, and not in the Buffett-stratosphere?

Now, I'm no Warren Buffett (believe me!), but I've just finished figuring out my federal taxes for the year. I live comfortably (one of the virtues of teaching in a business school), but was dismayed to learn that my federal taxes for 2007 amount to only 16 percent of my income.

This strikes me as astonishingly low. And it's not like I have a fancy approach to tax minimization; I just write off a bunch of business-related expenses, and benefit enormously from deductions for mortgage interest and charitable giving. Obviously city and state taxes drive my total tax bill up a bit further, as do payroll taxes, although I plan on getting some of that back as social security in my old age.

But the point remains: I had never quite realized that the Warren Buffett problem extends far enough down the income distribution that even folks like myself aren't paying their fair share.

So I repeated Warren Buffett's experiment here at Wharton. And it appears that I'm paying lower taxes than the administrative staff in my department. And if it is true here, I suspect the same goes equally for most folks in the top 10 percent of income earners. (Incidentally, according to Piketty and Saez, around half of all income in the U.S. goes to those of us in the top decile — roughly anyone with a family income of six figures or more.)

http://www.usnews.com/opinion/blogs/john-farrell/2009/04/15/no-tea-party-protests-for-teddy-roosevelt-republican-champion-of-the-income-tax

We grudge no man a fortune which represents his own power and sagacity, when exercised with entire regard to the welfare of his fellows.... We grudge no man a fortune in civil life if it is honorably obtained and well used.

It is not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community.

This, I know, implies a policy of a far more active governmental interference with social and economic conditions in this country than we have yet had, but I think we have got to face the fact that such an increase in governmental control is now necessary.

No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar's worth of service rendered—not gambling in stocks, but service rendered.

The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective—a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate.

I'm wondering why we can't be a little more fixated on this quote....

"Reagan raised Social Security taxes so high that by the end of 2008, the government had collected more than $2 trillion in surplus tax."

[Red Arrow]

I don't think Warren Buffett cares much about the taxes he pays on his first $106,800.......

I doubt it too.  Social Security benefits are also down in the noise compared to the rest of his income. The point is that he paid them and his benefits are based on the first $106,800 of his income, not his total income.  For most of us, the payroll tax represents more of our total income but so will our SS benefits.

I'm wondering why we can't be a little more fixated on this quote....

"Reagan raised Social Security taxes so high that by the end of 2008, the government had collected more than $2 trillion in surplus tax."

Because the whole story about how it got there is not included.  Rates went up some but the amount of income subject to the tax also went up from somewhere around $20,000 to $106,800.


I need to quit my job as an Engineer and get job as a Secretary for Warren Buffet.  For her overall (Federal) income tax to be in the 30% range, her taxable income would need to be taxed at a rate above 30%.  The 2008 tax tables show for a taxpayer filing as single, the 33% bracket starts at $164,550 and goes to $357,700.  The overall tax rate at $164,550 is ($40,052.25/$164,550.00) 24.34%.   Even in that range the deductions for yourself, standard deduction, 401K are significant.  At $357,700, the overall rate is 29%. This is obviously more than the overall rate that WB pays.  However, someone is taking the marginal rate and trying to make it sound like the overall rate.  The overall rate at $78,850 is 20.36%.  The poor working stiff (filing single) with taxable income of $32,550 is at an overall rate of 13.77%. A married couple can have a taxable income up to $65,100 and still be at the 13.77% overall rate.  A married couple with taxable income of $131,450 is taxed at an overall rate of 19.44%.  Remember these are taxable incomes, not gross income.  At lower income levels, the personal deduction and standard deduction are significant.  At slightly higher levels which enable a 401K contribution, that deduction can be significant. 

It appears that only the upper middle class is getting screwed.



Tax table info from the 2008 Form 1040 instruction booklet.