Financial Samurai

If in principle you accept a 50% flat tax, then why not a 100% flat tax? Then everyone’s income is equal. And everyone is a volunteer. If housewives, househusbands, can do it, then so can you.

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Financial Samurai Reply:
November 22nd, 2011 at 8:05 pm

Yep. That’s why I argue for Socialism As a Means To A Brighter future. Check out the post at the end of the post. Thx!

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Individual Reply:
January 30th, 2012 at 1:51 am

Socialism. When you are not willing to do it yourself. When you are a coward and are not willing to try. When you just do not care about individual freedom. Solialism is just a way to say life is too difficult so I just do not care to put in the effort to be self sufficient. As I stated it is the way of Cowards.

Individual

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This is quite typical of analysis that distorts the actual taxes being paid by rich vs poor Americans.

You dwell on the income taxes being paid by the top 10%, but never mention the Payroll tax or other tax burdens that the rich pay a disproportionally lower percentage of.

It does not matter if you only pay 3 or 4% in income taxes, if 50 or 60% of your income is taken by payroll tax and state and local taxes.

An honest analysis would show total federal taxes paid as a percentage of Gross Income, not AGI. Then you would see, just as Warren Buffet pointed out, that the rich are really not paying as much of their income to support the Federal Government as they delude themselves into believing.

The top 10% of income earners pay very little of the Payroll Tax, which was 35% of Federal Income last year, even with the 2% temporary tax break passed. And many or the top 1% get a sweet advantage in only paying a meager 15% on Capital Gains income, while wage earners are paying 35% with the exact same gross income. (And don’t even start the whining about being taxed again on money you already paid taxes on. Unless you are stupid or inept, you will deduct your basis for the investment from the selling price, and only pay on the profit made, not on the original investment money.)

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Financial Samurai Reply:
November 23rd, 2011 at 6:20 am

That’s because everybody who is working is paying the payroll tax, state taxes, and local taxes as well.

Sure, taxes stop at about $100,000 for payroll taxes, but so do the benefits.

Why are you using Warren Buffet as an example? He is the 0.0001%. Why not use the 1% at $380,000? Most of those people are working. The difference between the top 1% and the top 0.1% is HUGE. Don’t get confused.

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Steve Mc Reply:
November 24th, 2011 at 5:27 am

Yes Buffet is an extreme example, but so are most of those sighted in most of the postings you see on here. The point is that conservatives are always complaining about the bottom 50% of tax payers “NOT PAYING ANY TAX” – which is simply a LIE. Those in the top income brackets may indeed pay most of the INCOME TAX, but hardly pay most of the TOTAL taxes paid to the government. When you choose to ignore 35% of the income of the Federal Government to make your point – then your point is invalid.

Independent analysis of total taxes paid to all government entities; Federal, State and Local, show that the top 1% of tax payers actually pay about 23% of all taxes. But so do all the other tax payers, except for the bottom 12% who only pay about 5% due to not owning property which could be taxed. Yet that same top 1% take in far more that 23% of the total income.

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Financial Samurai Reply:
November 24th, 2011 at 5:44 am

Take it up withe IRS and those who keep track. We are discussing Federal Taxes here, you know, the taxes used to pay for our country’s welfare. We already know everybody who works pays local government taxes. There’s no ignoring anything.

You’ve got to pitch in on a Federal level as well Steve to support our country. One can’t escape the Federal level. One can move states and consume less. See the difference? Fight for equality. This post doesn’t have the opposite of the Buffett example making a point i.e. a single mother with no legs and 10 children to feed on welfare. We’re talking the 80% of the population, the majority, not the fat tails.

Damon Reply:
February 15th, 2012 at 8:54 am

Payroll tax includes social security and Medicare. Benefits we get back. No comparison to federal tax. Even if we increase taxes on the “rich” it will not put a dent in our deficit, although it will make people like you feel better.

tarjo Reply:
February 12th, 2012 at 3:14 pm

To respond to your comment on 11/24 (I can’t respond to it directly), you’re again showing that you don’t grasp that “federal taxes” and “income taxes” do not mean the same thing. Federal taxes are all the taxes the federal government collects. One of those is the income tax, which the post gives figures for. Another is the payroll tax, which composes about a third of all federal revenue, and which is paid disproportionately by the poor. Besides that, there is corporate tax, the estate tax, and capital gains tax. By equating federal tax with only one of its components (income tax) you’re ignoring all of the others and being misleading in the process.

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Financial Samurai Reply:
February 12th, 2012 at 4:11 pm

We are discussing federal income taxes.

It’s important you fight for equality. Discrimination is wrong. http://www.financialsamurai.com/2012/01/20/is-discrimination-and-censorship-ok-if-you-arent-being-affected/

Glen Ernst Reply:
November 23rd, 2011 at 4:50 pm

Actually the top 10% are mostly business owners who pay not only their own payroll taxes but also match the payroll taxes of all their employees.

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Jean-Claude Reply:
December 4th, 2011 at 5:20 pm

The quote was:
That’s because everybody who is working is paying the payroll tax, state
taxes, and local taxes as well.

What missed here is teh fact that if you work for your money, you can pay serveral times more in taxes on it, then if your earn your money as interest off your investments.

If I work for a wall street bank, and make a million $ this year in cash, I pay taxes on it at the highest rates (about 40-50% when it’s all said and done between Federal income and employment taxes)

If I get a $1 million stock option, and keep it a year, then I pay 15% on that, and don’t pay FICA or Medicaid.

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Bob McTigue Reply:
December 13th, 2011 at 5:41 pm

You are wrong about the stock option taxation. Exercised options are treated as regular income and you pay FICA & Medicare + regular taxes. If you hold the stock for a year and sell it , then you pay 15% on the gain and no FICA or Medicare.

Also, Medicare is the correct term, not Medicaid. At your level of knowledge, getting a $ 1 million dollar stock option would be a real stretch.

Steve Mc Reply:
February 15th, 2012 at 11:32 am

You are very close to right – you would pay a top rate of 37%, which is the 35% income tax plus the ~2% Medicare tax. The tax you pay on the first 110,000 for social security may add another 1% at most.

Meanwhile, as you point out, the guy on Wall Street who invests money to make money – pays only 15% on his/her income, and NO Social Security or Medicare taxes at all.

Capri Reply:
February 7th, 2012 at 4:51 pm

All I know is the more I earn, the more percentage I pay for state and fed taxes as a w-2 earner. I work 3 jobs and my husband works 3 and we are in the top 5%. Our estimated taxes for federal and state are about 30-35% of our income.
As a small business owner (and admit I am not the most saavy at knowing any loopholes etc), all I know is I pay more this year than my w-2 employees for FICA and match their medicare. It seems like unemployment taxes I pay are really high too….unemployment is something that most people don’t think about that their employers pay.
Bottom line, maybe I am working too much. I didn’t realize I was in the top 5%.

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Financial Samurai Reply:
February 7th, 2012 at 8:48 pm

It’s kinda telling that you work 3 jobs just to get to the top 5%! Which means, you want to make money, and anybody who wants to make money and improve their life and get there!

Steve Mc Reply:
February 15th, 2012 at 11:44 am

ARe you really in the top 5%, or are you like Joe the Plumber who did not have a clue as to where he fell.

Your AGI, would have to be around 410,000 if you are in the top 5%. based on the total AIG in the table above and nubmer of people in that group.

Since you should be deducting all the expenses you mentioned as business expenses, those would not count as part of your AIG, since they are deducted from your gross income to get your AIG.

As for the Medicare taxes, you as an employer will pay a 1.45% match to the amounts you take out of your employees wages. And you do pay more in Social Securtiy taxes, because only your employee gets the 2% reduction this year, and you have to pay the full 6.5%.

Obama, of all people, has perposed that your rate be lowered along with that of the employee, and currently, the Republican leadership is blocking such a move, which would look to help you. The Republican leadership insists that that tax reduction has to be paid for, even though the huge tax deduction for investers, which took their rate from 28% to 15% on Capital Gains, they say pays for itself. Not sure how that works, since my 99 cent calculator says that tax cut cost trillions.

ONe thing that would help a business owner like yourself would be to take Corporate taxes to a flat 12%. You would pay over 20% less than you do now, and companies like GE would have to pay taxes, instead of gettnig a refund under the current set up.

Jp Reply:
December 15th, 2011 at 9:03 am

Technically, it’s not a payroll tax. We don’t have any Federal payroll taxes.

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Mountain Man Reply:
January 26th, 2012 at 4:25 pm

There are several flaws in your “logic”. First lets start with what you call payroll taxes.
Payroll taxes are what you see removed from your paycheck. Which are Federal and State income taxes and FICA taxes.

Whether from a paycheck or not, everyone pays Fed or State inc tax.
FICA taxes are Medicare and Social Security taxes, combined. 7.65% total, 6.20% for SS and 1.45% for Medicare

FICA taxes ARE NOT capped at $110,100 (for 2012). The SS portion is capped at $110,000, the Medicare portion is not.

Next, what you see on your check for FICA taxes withheld are only half of FICA taxes. Your employer not only withholds your FICA taxes, BUT ALSO matches your FICA taxes and also pays the same amount. Your employer does that for you and each of your coworkers. Total FICA taxes are 15.30%, half of which are paid by the wage earner, the other half by the employer. If a small business owner, the owner pays 7.65% as an employee and another 7.65 as an employer.

Now lets do some simple math. My friend owns a small moving company. His employee size fluctuates, but averages about 20. Lets say his employees make $35,000 a year. Thats 20 x $35k= $700K total income. $700k x 7.65% (FICA taxes)= $53,500 total FICA taxes withheld.

Now lets say my friend makes $150k. He’ll pay as an employee, 6.20% SS tax on the first $110,100 of income-none on the remaining $39,900 is taxed by SS. Next he’ll pay 1.45% Medicare tax on ALL of the $150k.

6,826.2 ss tax + 2,175 medicare tax =$9,001.2 as an employee + another $9,001.2=$18,002.4 total FICA taxes as employee and employer + $53,500 as employer contributions for employees = $71,502.4

Now, the employer writes off all employer contributions from income taxes, but the fact remains, those FICA taxes are paid by the employer.

If the employer is a huge corporation like GM, the shareholders are the owners, and FICA taxes were paid before profits were figured.
Then corporate taxes were paid, by the corporation.
Then dividends are paid from the remaining money (if any).
Then dividend taxes are paid, by the shareholder, usually at the 15% rate.

So simply put, the “rich” pay about half of all FICA taxes.

Next, everyone seems to look how much taxes are taken from their paychecks, BUT FAIL to take into account their tax refund from the government. A refund from the government means TOO MUCH money was withheld AFTER all deductions are figured, and the government gives that money back.

Then there are people who qualify for the EITC. They are the ones who make
•$45,060 ($50,270 married filing jointly) with 3 or more qualifying children
•$41,952 ($47,162 married filing jointly) with 2 qualifying children;
•$36,920 ($42,130 married filing jointly) with 1 qualifying child; or
•$13,980 ($19,190 married filing jointly) with no qualifying children.

They will get a tax CREDIT not an exemption or deduction. They will receive or deduct from taxes owed,
•$5,891 with three or more qualifying children;
•$5,236 with two qualifying children;
•$3,169 with one qualifying child; and
•$475 with no qualifying children.

Considering that according to the US census, the average household income is $51,914, that means almost 50% of all families qualify for the EITC.
Here’s simple math.
A husband and wife make $45k together.
They have 2 kids.
Standard deductions for both parents is $5,950 each or $11,900 combined.
Personal exemptions are $3,800 each, for both adults and both children or $15,200.

Exemptions and deductions are $27,100
$45,000-$27,100= $17,900 taxable income.
Tax rates for married filing jointly are
$0-$17,400 income=10%
$17,401-70,700 income=15%

That means the couple will pay 10% on the first $17,400 and 15% on the remaining $500 for a total $1,815

Now factor in the EITC of $5326. Instead of PAYING $1815 they will RECEIVE $3511.

Now what must be done is to offset all other taxes paid throughout the year, from that $3511
You can’t GET money from the government for not paying taxes AND THEN not subtract that from other taxes paid throughout the year. Such as State income tax. In Illinois, State inc tax is 5%. That family would pay $1065 in State inc tax.
Subtract that from $3511 EITC= $2446
Other taxes accrued through the year might be sales tax, cell phone tax, etc. These are taxes based off of what someone spends. In Illinois, state sales tax is 6.25%. there are county taxes that can be added or food is taxed at 1%. Lets us 5% as an average tax rate, Since gross income was 45K, we’ll tax the entire $45 at 5%, thats $2,250.

Subtract $2250 (various sales taxes) from $2446 (remaining EITC)= +$196
The family made $45k, there FICA taxes were $3442.5- $196 (remaining EITC)= $3,246.5

Thats $3,246.5 TOTAL taxes paid on a $45k income. Thats about 7% of income.
Granted, not everyone qualifies for the EITC or the top amounts.
At the same time, Illinois, where I live has one of the higher inc tax rates. 7 states have no income tax and 2 only tax dividends and interest.

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Warren Buffet is not the only one in the upper category that is speaking out, and they are saying that the burden is not as great on them as it is on the lower 50%. I would tend to believe them rather than you.
The reason to mention them is obvious. The difference in the percentage he is in is irrelevant. Try doing some research beyond Rush Limbaugh’s pie graph (with all due respect).

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Financial Samurai Reply:
November 23rd, 2011 at 2:41 pm

I’m all for tax increases if I’m Warren Buffet. That’s obvious.

You need to fight for equality and have everyone pay.

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Christian Reply:
December 30th, 2011 at 4:35 am

I would give credibility to Mr. Buffet and all of the other super wealthy that say they should be paying more in taxes as soon as they start taking only the standard deduction and stop offsetting their investment gains with losses. Only then will I believe.

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Frank Reply:
January 21st, 2012 at 8:42 pm

warren buffet donated his entire fortune to charity.. does he REALLY care about his money ? he donated all his money to the Bill and ???? Gates foundation so his kids wouldn’t have the “burden” of money .. is this someone who we should really take example from?

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Steve Mc Reply:
February 15th, 2012 at 12:01 pm

YOu are distorting what happened. He did not give ALL his money to the charieties. Agreed it was in the high 90% range.

He rightly pointed out that he had given all his kids good educations and a nest egg to start out with, and expected them to work like he did to improve themselves.

He has the right to do with his money as he chooses – If he were My Dad, I would say the same thing as I do to my own – just leave enough money to pay all your bills and plant you. If there is anything else left – so be it.

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So…what is the wage level for the top 1% of global wage earners???

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Financial Samurai Reply:
November 23rd, 2011 at 4:31 pm

Global? Probably much lower than the Top 1% of $380,000 here in the US. I would venture to guess the top 1% globally probably makes around $100-150,000.

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This isn’t realistic for two reasons. A person like myself can never work that many hours per week for a few reasons. I have a child – this is something you don’t take into consideration here. I am one of many people in this situation (and please don’t assume that I am some young thing with a bunch of baby daddies because I’m not). I’m 50 years old and I have a 13-year-old daughter.

Another thing is that both my daughter and I suffer from a genetic disorder that dictates the number of hours I’m able to work. I have to be careful because it affects my vascular system. It is progressive so it will get worse, not better, unless a cure comes along. Having said that, I have paid my taxes and I have paid into Social Security.

You suggest San Francisco as a place to go and earn a higher wage. If you lived there then you know what rent is there. When I left San Francisco in 1997 I was paying $700 for a tiny apartment with a kitchen a bedroom and a bathroom I had to share with other people. It turned out to be a fire hazard and was condemned. Before that I lived in a flat that was $1500 that was split two ways. Now, in 2011, rents are untouchable unless you’re making somewhere between $75,000 and $100,000 a year, unless you want to cohabitate with a bunch of people. I have spent months looking for a possible decent place to live there because I want to move back. There is no way we’ll be going to San Francisco, although, that’s where I want to be.

I’m not whining about it. It is what it is. But there are some serious holes in that theory.

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Financial Samurai Reply:
November 23rd, 2011 at 5:27 pm

Sorry, please clarify what my theory is? My statement is that everybody should pitch in to help out the economy. Everybody needs to have skin in the game and try and contribute more than they take.

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Jeff Reply:
November 26th, 2011 at 7:32 am

Maybe the problem is that you see “working more hours” as the only solution to increase your income. How about working a regular schedule and then studying how to start your own business on the side? You need to escape the trap of having your salary be your only income if you want to have the money to truly take care of yourself and your daughter.

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Christian Reply:
December 30th, 2011 at 4:38 am

The time you spend studying would be part of the additional work being referenced. You are simply delaying the compensation for this work until you start making a profit on your business.

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LMAO @ Obama holding a puppy in the picture. The left is usually more subtle.

We need a flat tax. Everyone pays the same percent.

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Financial Samurai Reply:
November 26th, 2011 at 11:08 am

Wow, after almost 800 comments, someone finally points out the post’s picture! You deserve a prize! :)

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John Reply:
November 30th, 2011 at 9:44 pm

The tax code is how the government steers the economy. To argue for a flat tax is to argue against anything that the government currently subsidizes. Why? because lower taxes for certain things are effectively a subsidy towards them. We currently spend quite a bit on oil, and hate our $4 a gallon, but without the subsidies, how much would our gasoline be at? Nevermind nuclear power, rivers not catching on fire, penicillin, or anything else that the government has subsidized. Ergo, I feel that an argument for a flat tax to be shortsighted.

On to your argument about state government vs federal government taxes. Government is government, and taxes are taxes, you can shield your grouping down to some miniscule direction, but you are merely making another shortsighted argument. Further, you said that the lower 47% do not pay taxes. Sadly, you forgot to cite that data. Your data, provided by the IRS, only shows the lower 50%. And, and they pay 2.53% effective federal income tax. Which brings me to another discrepency. We all pay taxes into the federal government, and not all of the federal taxes that we pay are considered income taxes. Give you an example: Tariffs that we wage on countries. When I buy my Iranian rug, or my chinese tires, I’m paying a tariff (because the cost is shifted to the consumer, right?).

The problem isn’t that the rich are rich, or that the poor are poor. The problem is that the proportional aggregate change over the past 30 years has been to increase poverty, and decrease liberty.

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Financial Samurai Reply:
December 3rd, 2011 at 7:32 am

You think poverty rates have increased as a percentage? I’d like to see that data given the US has become tremendously wealthy over the past 100 years.

I would argue that poverty rates have decreased as percentage in America, and just the absolute and percentage of the rich has increased.

When everybody is making money, it’s OK for the rich to be rich. Funny as soon as there’s a downturn, it’s not OK.

Feel free to start a new thread.

Steve Mc Reply:
February 15th, 2012 at 12:20 pm

Are you on the same planet as the rest of America? Recent reports from the 2010 Cencus show that the average wage in America has fallen to $28,000 per year. In your own table, the bottom 50% show an average AIG or only $15,354, while the top 1% show an average AIG of $1,204,247. And you think that poverty is going DOWN? REALLY!

We had a ballanced budget for four years in the ’90s, at much higher tax rates than today. We also had an economy that created 23,000,000 net jobs, in the ’90s. We had a middle class that was the engine of the economy, growning and consuming.

Then we had the great TAX REVOLUTION of the Republicans, “lowering the taxes on the JOB CREATORS” So where are the jobs? If you deduct the massive growth in government jobs under Bush, you have a net NEGATIVE job growth under their tax policy that was supposed to bring millions of jobs. WHERE ARE THE JOBS?

The JOB CREATORS is a MYTHE. They do not exist, or there would be plenty of jobs for all.

So let’s go back to the tax structure of the ’90s and see if we can ballance the budget again. Or do we kick the can on down the street again?

You know what you talk about a lot and I don’t think you realize that when pushed to far people stop playing by the rules and when the rules have more than half the population pissed at you for having somthing they want…just wait they will take it one day probably not in our life time but when it does it will be bad… Poor people who don’t pay whatever percent you are talking about(i am sorry that i didn’t ever get good with numbers) in taxes may one day get sick of not making enough money NO MATTER what they do(and this is real some people just find whatever they can to earn a living and hold on to it for dear life) They may feel entitled to the good things others have that they want and they will take it if they want it enough(or need it enough) I don’t believe this country will ever do anything to fix where we are heading because we allow everyone to have there own opinion and there is no control over the citizens… one day that 50% will be knocking on your door to take you and your families things for no reason other than they don’t have it and you do and THAT ain’t fair you want to talk about equality well give everyone the same hardships stop acting like somone in the upper 5% won’t be able to eat a week because they got an extra 40 dollars that month taken away by you assholes this isn’t just numbers people this is not just statistics this is peoples lives shame on you for your post

Even though you have the right to say what ever you want. Support our troops(cause they are just trying to make a living the only way they could)

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JD Reply:
December 23rd, 2011 at 1:57 pm

If the poor STOLE all of the wealth in the country today, within a year they’d be poor again and the wealthy would be well on their way to success once again( Let’s call this the lottery syndrome). It’s a mindset, and it’s hard to understand it when you have the mentality of a criminal. Of course the disparity is rising between the rich and the poor, except for the housing bubble, where you could go into negative wealth, zero will always be zero!

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Financial Samurai Reply:
December 23rd, 2011 at 3:14 pm

Isn’t raising taxes in others without having to pay more taxes yourself stealing?
If so, we’re well on our way?

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Charles Reply:
January 31st, 2012 at 9:29 am

Calling it stealing is gross hyperbole. Taxes are set by an elected legislature. Most post war periods have seen top tax rates at double or triple current rates. This is absolutely normal. What is crazy is having multiple wars while at the same time lowering taxes.

I completely accept the fact that wealthy people feel threatened that they may be asked to contribute more in taxes (although its still well below historical standards), so irrational knee jerk exaggerations are not a surprise. But I do think we need to peel back the layers of the onion and have a sober discussion on the topic. The more we discuss it, the more likely we are to at last reach a rational solution.

This article is as CLEAR AS MUD ! Is the Top-1% included in the Top-5%? Is the Top-5% included in the Top-10% ? Etc. etc. all the way down the line to the Top-50%. And there are no numbers given for how many people are in each category, nor what each category collectly paid in $. Also, it is not clear what taxes you are actually talking about, if it is Form 1040 Individual Taxes ? Or does it include that portion of Corporate taxes that each category has in stock ownership ? Also, since 35% of all USA revenue comes from PAYROLL taxes and the Top-1%, Top-5%, etc. pay a MINISCULE amount in that category, doesn’t this look like the ‘poor’ are overtaxed even tho you claim they are ‘free-loaders’ ??
Furthermore: Where is YOUR OFFICIAL source of IRS info. coming from, so your figures can be substantiated ????????????????????????????

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Financial Samurai Reply:
November 30th, 2011 at 7:45 pm

Sorry you can’t understand the chart. Go to irs.gov and spend time researching. Tons of wonderful info for you.

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Iceman Reply:
December 7th, 2011 at 11:04 am

Gary its a cumulative result use your noggin. Please have the lawmakers change the laws concerning payroll taxes, $106,800 you only pay Medicare….but to take to task those people for a law they didnt create, please….

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Katie Reply:
December 16th, 2011 at 9:01 am

I found the chart very easy to understand, sorry you didn’t.

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It’s interesting that when asked to justify excluding the FEDERAL payroll tax from your poor bashing article you say “but the benefits stop at $100,000 too”. The very programs you decry as socialist are the ones you say must be fully paid for by the recipients and not have the cost spread over a wider income base? What’s socialist about that?

It’s also a fact that most of the money people pay into entitlement funds flow directly to current recipients and build no individual interest credit for the recipients over the decades that the government has use of it. And, f you die you get nearly nothing. Imagine a two income couple making near the limit each year for their whole working lives and both dying at 67, vs a guy making twice the limit in cap gains from an originally untaxed inherited trust fund. He would have done no actual work to get his income, paid zero in payroll taxes and got no SS benefit but fully eligible for medicare at 65, and so would the similarly earning (but actually working) couple who would have paid in 15+% of their productivity to the federal government their whole lives, been entitled to like 40 or 50 grand a month total (if they had lived, which would still have been a net loss unless they lived to like 110.)

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Jim S Reply:
December 1st, 2011 at 8:48 am

Oh and the couple would have paid nearly twice the federal income taxes too since theirs was all “earned” income, which is unfavored under the current tax system which you probably say should be made by a government that doesn’t “pick winners and losers.” You are a panty waisted errand boy for the country club fat cats.

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SykoMoe Reply:
December 1st, 2011 at 12:52 pm

So the fact that someone else worked extremely hard maybe 1 or 2 generations prior to the guy who inherited has nothing to do with the reason why people should not only work hard for themselves in their lifetime but for future generations to come? People seem to have a sense or idea of entitlement based on a participation of the economy. I’m here working 9-5 so I deserve the same as the CEO that works 60+ hours a week and has spent his whole life preparing to be successful. Professional Sports don’t win games just by “participating”, they win games by actually providing for the team what team needs from them for a Victory….. the problem right now? sense of entitlement. We can continue down that road and eventually no matter what people do it’s worthless…. A major corporations’ CEO is worth and makes just as much as the kid working a Fast Food counter? i don’t think so…. Anyone can learn to take an order, everybody is not capable of running major corporations.

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Jennyct Reply:
December 25th, 2011 at 7:07 am

Why do you think that huge salaries, windfalls and inheritances are the result of “extremely hard” work?

I’ve been privileged enough to witness this is not always the case.
More often than not, it’s connections and opportunity, as well as persistence.

Steve Mc Reply:
February 15th, 2012 at 12:34 pm

This is a silly aurgument – of course everyone can not be a CEO and most people can learn to flip a burger – ( I would challenge your assertion that everyone can do that – I have seen people who couldn’t learn that task.)

The point should be that everyone should pay an equal percentage of their income to support the governemtnts in the US; State, local and Federal. When you compare the total taxes paid by the five quintels of income earners, only the bottom pays significantly less than the other 4 groups. And the top 20% only pay a couple more percentage points than do the middle 60%.

Sure the rich pay a higher amount of the Income Taxes, but they do not pay a significant portion of the payroll taxes, unless you contort yourself into the amounts that business owners pay as matches.

And the rich pay a substantially lower percentage of their income in local and state taxes, which is why their total ends up similar to other groups overall.

You want a true flat tax rate – then subtract a flat amount from total income of all types for each dependent and yourself – then subtract your state and local taxes paid, and pay a flat rate on all the money that is left.

The top 1-5% will not like such a system.

SykoMoe Reply:
February 15th, 2012 at 4:07 pm

Hey Steve, so silly of me to have such an argument. I do not agree with having a flat tax. I think our system needs restructure but I don’t think a flat tax is the way to go. If the folks that you have encountered are truly unable to learn a simple task then they provide very little contribution to the advancement of humanity let alone the economy. I don’t feel bad for them. You and I say, “of course not everyone can be a CEO”, but there are plenty of people out there who believe that they are entitled to the same financial treatment that the rich get. That is the root of my argument and if by using such an extreme analogy I struck the wrong cord in your guitar, I appreciate these facts that you bring forward. I still disagree.

High tax rates on high incomes does not hurt the “rich” as much as it hurts those aspiring to become “rich”. Very few “new” wealthy were created when the top marginal rate was near 90% after WW2. It was just not possible to “accumulate” wealth when the government left you with only enough to live on. And we all know that wealth generates more wealth. High taxes on high incomes maintains the elite bunch of “currently wealthy” which means better tee times at the country club, and less competition for the better things in life. If I were rich, I would want high taxes so you could not become rich and move into my neighborhood.

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Financial Samurai Reply:
December 3rd, 2011 at 7:35 am

Interesting point, and something I can understand. There’s a difference between the Top 1% who start at $380,000.. vs the rich that is depicted.. the multi-millionaires and billionaires.

The gap between the top 1% and top 0.1% is even greater!

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Cnile Senior Reply:
December 3rd, 2011 at 9:23 am

The downside of “old” money is it’s void of innovation. Whereas “new” money is usually spawned from innovation, ie Steve Jobs, Bill Gates, (Carnagie, Frick, Westinghouse in their day). The heirs of the rich seldom do more than just protect their wealth.

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Iceman Reply:
December 7th, 2011 at 11:06 am

Yes any money older than the 1920s we should just take it all…what a ridiculous comment…

Pat Sunseri Reply:
December 13th, 2011 at 11:35 am

I did not work my ass off for 20 years sometimes working 24 or 36 hours straight creating two successful businesses for myself, I did it to give my children a better life. I’ll be damned if anyone other then my children get my money when i die. If they grow up to be idiots and squander their wealth and end up poor, then screw them. But I earned and saved the money for them. I saved instead of living lavishly and always living well below my means. i could have just as well lived like a rock star, but I choose to leave something for them to help them in the future get a head start. Who the hell are these people that think they deserve the fruits of my labor and frugality? Please come to my house and try to take what I have worked so hard for. I am a fighter and always have been, that is how i got ahead in the first place. Good luck organizing a bunch of losers more interested in who just won Dancing with the Stars then how they can get ahead in life. I came from a poor family and am self made. My children should be able to reap some of the rewards of my success for gods sake.

Financial Samurai Reply:
December 13th, 2011 at 2:36 pm

Dancing With The Stars? I thought they watched Jersey Shore?

I see many, many folks confusing the terms income and wealth and only using the most convenient statistic for their purposes. If we are talking about income tax (and the top 1% makes over $379k), for the most part it refers to workers that earn “income”, or income generated from interest from savings/retirement plans and dividends, etc. These dividends and interest is a large percentage of our elderly support themselves, the interest on their lifetime savings. Wealth, on the other hand, is the accumulation of everything we’ve worked for our whole life. Not surprisingly, older folks have accumulated more than 20-somethings. What we have now has got to last us until we die

If you look at those hated one percenters, you’ll find that most are in late middle age and at the peak of their career. Many are highly educated professionals. Many are saving aggressively for their own retirement, their children’s college and some of us sandwich generation folks are caring for our elderly parents too. Yeah, we make more than you do but you know what, we worked very hard for years and years and years to reach this goal. We also get to keep about half of every dollar we earn.

Lots of us didn’t get everything we wanted but we worked hard for what we do have. And now, we want to enjoy the fruits of our labors. Instead, the disenfranchised from one of the richest nations on the earth have decided that we don’t deserve what we’ve worked a lifetime to earn. For some reason, these folks think they deserve our earnings more that we do. I’ll admit it, I just don’t get it.

Yes, there are other taxes we face – payroll taxes, which are a percent of income, not flat (yes, except capped at ~$108,000 equal to the cap in corresponding benefits,)

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Pat Sunseri Reply:
December 13th, 2011 at 11:39 am

AMEN! Plus many of us that earn over $250,000 live in parts of the country with extremely high cost of living. $250,000 in NJ is a hell of a lot less then $250,000 in Alabama.

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Yet another threat from the Baby Boomers. Current Federal tax policies will devistate the country in just 15 years.

The federal government gets 38% of it’s revenue from just 1% of taxpayers. From the 2010 census, 86% of these top 1% are boomers in their 50′s and 60′s. The majority are expected to fully retire within the next 10 to 15 years. What happens when up to 35% of the federal tax revenue disapears? It leaves barely enough to support the military and pay interest on the national debt. Social programs such as Social Security, Medicare, etc, are unfunded, and the countries ability to borrow will be greatly reduced. Then what? Anyone, anyone?? Then what?

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Pat Sunseri Reply:
December 13th, 2011 at 11:40 am

Uhmmm, those jobs will go to others who will then pay the taxes?

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A simple Herfandahl-Hirschman Index (HHI) for the top 20% of wealth holders in the US reveals a staggering 7,225 on a scale of 10,000. In comparison, the Federal Trade Commission considered a HHI for the top 50 firms in any industry greater than 2,500 as “Highly Concentrated.” When one considers the “progressive” tax rate on income, one finds that at the highest income levels, it actually becomes REgressive. Couple these facts with the FICA AGI cap of $110,000, low capital gains taxes vis-a-vis wage earners and the omission of payroll taxes. It is also important to remember that only 19% of tax returns for incomes over $10,000,000 were attributed to wages and salaries.

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Cnile Senior Reply:
December 13th, 2011 at 3:21 pm

The IRS still contends that the top 1% still pays 38% of ALL income tax and the top 5% still pays 59% of ALL income tax. And the bottom 50% pays pittance.

Are you saying this is not true?

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Jennyct Reply:
December 25th, 2011 at 7:14 am

If there were no cap on FICA benefits salary wise, then there should be no cap on payments. But the fact is that there is a cap on benefits.

I would rather pay higher income tax than give above and beyond what I will not get back in a benefit that I will not be eligible for.

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This isn’t realistic for two reasons. A person like myself can never work that many hours per week for a few reasons.
I have a child – this is something you don’t take into consideration here. I am one of many people in this situation (and please don’t assume that I am some young thing with a bunch of baby daddies because I’m not). I’m 50 years old and I have a 13-year-old daughter.

so, I should pay more taxes because you have a child? Sorry, what does that have to do with it? You get a deduction for your child, so your already paying less because of her.

Another thing is that both my daughter and I suffer from a genetic disorder that dictates the number of hours I’m able to work. I have to be careful because it affects my vascular system.

Oh, yea, I suffer from one as well. In my case it’s called Pitty.. as in I want to be pittied for not being able to work as long. I need to call the Dallas Cowboys and complain that although I don’t have the talent, I want to earn Tony Romo’s paycheck.

I’m sorry to hear of your disability, but still don’t understand what this has to do with tax rates. I’ve seen total paraplegics do wonderful things. Look at Steven Halking (sp?)

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Jennyct Reply:
December 25th, 2011 at 7:16 am

jean-claude, count your lucky stars that you do not have a chronic health problem…

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Yet another threat from the Baby Boomers. Current Federal tax policies will devistate the country in just 15 years.

The federal government gets 38% of it’s revenue from just 1% of taxpayers. From the 2010 census, 86% of these top 1% are boomers in their 50′s and 60′s. The majority are expected to fully retire within the next 10 to 15 years. What happens when up to 35% of the federal tax revenue disapears?

You mean that just because they retire, they 15% they pay on their investments will stop? They will retire, but their investments still be working hard, and they will be paying even less overall then they do now

It leaves barely enough to support the military and pay interest on the national debt.

So, maybe, just maybe, we should take a page from the rest of the world and not fund a military to a ‘per citizen’ average that leads the world. Maybe, we should stop sending money and troops to protect America’s interests, when those interests are for the top 1% of america. Maybe, funding Pakistan so they can hide Osama wasn’t the best move.

If I grow my company too big to fail, using poor investment or business models, then I SHOULD FAIL, and be allowed to fail.

Social programs such as Social Security, Medicare, etc, are unfunded, and the countries ability to borrow will be greatly reduced. Then what? Anyone, anyone?? Then what?

The irony is, Social Security was funded, and makes more then it needs. Congress just can’t stop stealing it away. Same goes with the post office.

The post office years ago realized people hate the fact stamps were changing every year. So, they raised the stamps enough to cover three years. They ran a surplus in year one, broke even in year two, and planned on using finds from year 1 to cover year 3. The problem is, congress got involved and stole that surplus to fund the war on Terror. So, year three, we had another cost increase

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Look at the tax rates when our country was doing its best in the 1950s and 1960s. The tax rates of those top 1% was around 90%. The tax rate of the middle and lower brackets were lower. It is not true that the lower class pay no taxes. They also pay sales tax on almost everything they buy. This is at a much larger percentage than the rich because they are not forced to spend every cent they make to survive. Things have to change or there will be a revolution in this country.

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Cnile Senior Reply:
December 8th, 2011 at 8:27 pm

Mike – I lived thru the 50′s and 60′s when EVERYONE in town went to the American Legion hall once a month to pick up “government surplus” cheese, flour, powdered milk, etc. Believe me, the country was not doing well. The economy did poorly until JFK lowered the top marginal rate to 70% and the Vietnam War cranked up. There was no middle class to speak of until the late 70′s, expanding dramatically in the 80′s.

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Warren Reply:
December 10th, 2011 at 6:36 pm

There is no Federal sales tax. That is state and local only and does not fund the Federal government is any way. What we are talking about here is the Federal income tax which is how the Federal government is funded by the citizens directly.

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Jp Reply:
December 15th, 2011 at 9:02 am

Just look at the size of the Federal government in the 1950s. Would you like to go back to that level of services? I know I would.

Second, you have to look at tax rates versus tax revenues. Revenues do not go up when rates go up. People put money into tax shelters instead of using it productively. Lowering rates means more people will invest, thus growing the economy. (All else being equal, of course. You can’t have expensive regulations that increase the cost of doing business, and expect the market not to behave accordingly.)

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The author of this article has not taken marginal utility into consideration, which is a typical oversight from almost all conservative economists and politicians. Specifically, the marginal utility of the dollar.

While the rich pay disproportionately more tax dollars than the middle class, and a higher percentage of taxes on ordinary income (setting aside capital gains for a minute), conservatives don’t understand that the burden of U.S. taxes is still substantially higher on, for example, a pizza delivery boy than a corporate CEO making $250,000+. That is because any given person doesn’t value all of the dollars in the bank the same. Dollars going toward primary needs (food, clothing, shelter) are highly valued by anyone, dollars going to secondary needs (automobiles, household appliances, etc.) are slightly less valued, dollars going to tertiary needs even less valued, etc.

Thus, a 20% tax on a guy who can barely afford to make ends meet is a much greater tax imposition than an 50% tax on a guy who is making $250,000+ a year. With a 5% tax hike, the first guy may no longer afford to be able to put milk on the table, while the second guy may not afford to buy his eighth Ferrari.

When you factor in marginal utility into the equation, it is clear that the rich in America, even though they play disproportionately more tax dollars than the middle and poor classes, and even though they may pay (setting aside capital gains for a momen) a larger percentage of their income than the middle and poor classes–they are actually undertaxed.

Conservatives often will say that the tax rates on corporations in the US is higher than any other country in the world. They often fail to point out that revenues from corporations in the U.S. is also the highest.

More importantly, the effective tax rate for the wealthiest in this nation has decreased over the last decade, commensurate with our national increase in unemployment.

This is exactly why the “across the board” tax cuts implemented by Bush (and to his discredit, carried by Obama) were so devastating to this country. It treated every company the same, when in fact there is nothing more unequal than the equal treatment of unequals. Companies are not all the same, their valuation of dollars differ based on their supply of capital. Lots of small business are struggling and are overtaxed, but lots of large businesses are raking in millions of dollars a year.

Since the rich pay most of the tax “dollars”, even a small tax cut to the upper 1% of income earners translates into massive budgetary shortfalls. In Clinton’s last years of office, we had budget surpluses. And the tax rates on the wealthiest Americans were higher than they are today. Not to mention we had better employment rates.

Moreover, jobs are driven by demand just as much as they are driven by supply. The expression “I’ve never got a job from a poor person” is dangerously misleading because
it doesn’t consider the fact that when lower and middle class people receive, for example, government entitlements, they spend the money to buy goods and services in local markets–and with increased sales, stores often need to hire employees to accommodate increased demand for goods/services.

On top of this, income correlates with spending–the lower a person’s income, the higher percentage of their money that person will spend relative to their income. The highest income earners spend the least amount of money relative to their income; the lowest spend the most. Wealthy people still buy Ferraris and yachts and that sort of thing–so it may seem like they are spending a great deal of money. The key is–relative to their income.

If you give $1,000,000 tax cut to 1 rich person, for example, he may buy himself a gazebo in his mansion for $200,000. That’s 20% of his tax savings back into the economy. But if you instead spent the money giving $1000 checks to to 1000 poor or middle class people (totaling the same $1,000,000 figure) each person, on average, may spend 90% of it. It doesn’t matter what they spend it on–Badly needed household appliances, food, auto work, — even booze, cigarettes, ipods, prostitutes. (expected value $800,000- back into the economy). You get more spending, and hence more, stimulus to the economy that way.

And this is one of the main reasons why this country is failing — huge volumes of capital are being hoarded, or held hostage, by the wealthiest Americans (in fact, there is a historical record for the high level of capital being held on the books by corporations and other business entities). Meanwhile, the middle and poor classes are scrapping for the crumbs under the table. These latter groups–many are now unemployed, living at home with their parents to cut down expenses, and burning through their wealth. When they run out of wealth, and can’t get any more credit, they will be compelled to stop spending. And once spending stops your blood supply stops and the economy collapses.

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Pat Sunseri Reply:
December 13th, 2011 at 11:46 am

And our economy is driven 71% by consumer spending. Some day other countries will have so many dollars from Trade deficits that they will use the dollars to wipe their asses. How does printing money for people to spend mean we are a strong economy? Being a productive nation that has trade surplus made this country great not the other way around. Marginal utility my ass, consumption alone is not productive or Europe excluding Germany would be prospering.

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you’re referring to the mega-rich. I pay 35% taxes and all of my payroll taxes, and we are taxed for all monies that are retained by our business as ordinary income. It is very difficult. Most of us in the 1% are barely there, and are taxed to death. for 2009 our business was 180K in the hole, 2010 we made that up but after paying our vendors we had to pay tax on that 180K that we owed to vendors, that isn’t money in our pocket but we are taxed on it anyhow. That’s $63,000 taxation on money we never had. Don’t get delusional that that is all earnings in our pocket. Most of our earnings although taxable go to hiring more employees, or for equipment, or held for future hard times, so we don’t have to let employees go. So next time you want to complain that business owners are saving money………….that’s right! I’m trying to save my employees jobs, which I can’t do if I have nothing saved up for them in slow times. YET it is still taxable. Get a grip

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Jennyct Reply:
December 25th, 2011 at 7:18 am

Would I be incorrect in saying that you would not hire if you did not have the demand?

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Paulette Reply:
December 27th, 2011 at 5:28 pm

Yes, of course companies don’t hire if there isn’t a demand, but it is just as important to hold on to your employees when demand is low, as all companies have an eb and flo.

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There are a wide variety of people who are the 1%, from people who live solely off of investments to those, who like the previous post, have to work extra hard.

Those of us who are better off often have the ability to write off some of our income. For example, I get a tax break for my student loans and for my mortgage interest charges. These write offs amount to money lost by the feds. At some level, I could consider these to be “entitlements.”

People in lower income levels do not have these types of write offs. So, the feds give them EIC. That doesn’t make me upset in the least. Many low income people’s AGI is the same (or nearly so) as their gross income. Seems fair to me: I get a write off, they get something similar.

All in all, I do not buy into using AGI as the best method for comparisons. I prefer using wealth (defined as assets minus liabilities) as a means to compare. I believe that when we use that method, things look a bit more equitable than the method used in this article. At the same time, I have seen numerous methods used to explain all this. Each method carries with it its own strengths as well as its own weaknesses.

My bottom line is this: a society is not infinitely sustainable unless the individual is willing to give up some freedom for the benefit of the whole. As someone who lives in the top 20%, I think I have it much better than the bottom 20% and I have no problem allowing a portion of my income to go toward them. No problem at all.

As a side note, I really appreciate that the writer actually responds to many of these comments! Thank you.

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Wah-wah. I have two loaves of bread under my arms. If I try to give you a slice, I may drop one of them.

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I’d like to understand how anyone could expect a person to pay income tax when he or she is spending 100% of disposable income on necessities (i.e. food, shelter, medical expenses).

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Just for clarification – Is this household income? Gross or adjusted net?

Thank you

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Warren Buffet and anybody else who claims to be under-taxed may visit pay.gov and give all they want.

But next time somebody says they pay too little, ask if they itemize deductions?

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I just stumbled across this website, and am acutely aware of the possibility of miscommunication. So my question is this: Is this article a joke? Seriously.

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I love seeing stuff like this. I am kinda surprised to the numbers are so low, only 33K to be in the top 50%.

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Guy’s we don’t have a taxing problem, we have a spending problem. We need to throw out all of the incumbents in congress, maybe they’ll get the message that we’re not going to take it anymore. Government is bloated with all the losers who couldn’t compete for a job in the real world(Tattooed, body piercings,etc. Jersey Shore types). The funny thing is that the losers make a hell of a lot MORE then their counterparts, whom by the way are paying their salaries( this is the most absurd thing I’ve ever heard). I’m a small business owner and I have to pay for families healthcare, which costs $1,600 a month, that’s more than half of the income the Top 50% earn. Meanwhile the government just keeps raising the bar for the SO CALLED POVERTY Limit. If you’re below the poverty line you get free housing, food, healthcare, cell phone, child care, etc. Those that need it, should get it. Those that want a free lunch, put them to work cleaning the streets!!! Cut the Federal Government by 20%, and you’ll see how quickly our deficit will decrease.

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AGI isn’t the perfect measure of income. A lot of income such as Social Security and tax exempt interest isn’t taxed. This distorts the numbers especially re income thresholds, senior citizens, and the bottom of the chart.

Also, the chart lists tax returns, not people. Let’s say Taxpayer A is married filing joint with $500G and a stay at home spouse. Lets say Taxpayer B lives with Taxpayer C and each files single making $250G. Each household has $500G, but who is in the 1% per the chart?

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Financial Samurai Reply:
December 26th, 2011 at 10:48 am

What difference does it make? Team A and Team B both make over $500,000.

You can nitpick the stats forever, but this sample set is as good as it gets! Perfect is an illusion!

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Taking a cue from this article, I feel sorry for occupy protesters. Time badly spent, they could have done better by improving their skills during the time they occupied. Its not hard to be rich, you need to be hardworking, and you need to use your brain in a better way.

Whoever is against this theory, a simple question, why the rich can and you can’t?

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If we wanna TALK ABOUT FAIR!!!!!!!!!!!!! LETS REQUIRE EVERYONE TO EARN THE EXACT SAME AMOUNT HOURLY OR BY SALARY THEN CHARGE THEM 20% SO WE CAN REALLY MAKE IT FAIR. MORONS. It’s not fair that some people work their butts off a thousand times harder making minimum wage and someone who just sits down all day in a cubical can make 50,000 a year. Let’s talk about fair here. It’s never going to be fair and G-d says it rains on the just and the unjust and when the PHARISEES complained about taxes owed to Ceaser Jesus said “You fools give to what is Ceasers and give to G-d what is G-d’s” In other words give to the governement what is the governement and stop complaining!!!!!

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Financial Samurai Reply:
January 2nd, 2012 at 2:49 pm

Who are you talking to Anita? Do you not live in America where you have control over your own destiny?

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Janna Reply:
January 7th, 2012 at 5:56 am

I think what Anita is addressing is your claim that it is not “fair” that you and the rest of the top 1% are paying a greater % in taxes. I think she is saying that life is not always fair…. that a lot of people in jobs that are important to us are never going to make the kind of money you make. A lot of people are just as smart or smarter than you and worker just as hard or harder than you, but are not making the amount of money you make because of the kind of job it is. And their job may be the perfect job for them as far as what they enjoy, or are good at, etc. (For example, teachers are very important. We NEED good teachers, but we are never going to pay them $380K to do their job.) Whether that is “fair” or not, it’s just how it is. And you may not think it is “fair” that you have to pay more taxes, but that’s just how it is.

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If I buy a property with a $100,000 to 200,000 us. value, how much taxes will I pay?

Thank you kindly.

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Looks like Romney may have shot himself in the foot. Forget about the fact that he is only paying an approximately 15% effective rate on however many millions he made that year (mostly capital gains). I think his big mistake was his offhand comment that he also made some regular income from speeches, but “not very much” he said with a laugh. So, it turns out that “not very much” was 374K for 9 speeches. So, doing the math… in one speech, he made more than the average American makes for a whole year, and yet he considers it “not much”. Just shows how out of touch with reality all these guys are!!

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AFTER READING ARTICLE COMMENTS I HAVE A FEW THINGS TO SAY:
CONGERESS: TERM LIMITS AND RESPONDSIBILITY CLAUSES

TAXES: WHEN BILLS ARE PASSED FOR PARTICULAR REASONS/ PRISON TERMS FOR
MISAPROPIATIONS OF FUNDS.

GOD: WHEN SOCIETY HAS A MORALE BELIEF SYSTEM AND VALUES. SUCESSFUL GOVERNMENT WILL PREVAIL.

WE HAVE TALKED TO LONG, VOTE, CREATE GROUPS WITH SAME IDEALS AND PRESENT YOUR IDEALS. ACTION IS WHAT THE REQUIREMENT DESERVES NOT IDEALISTIC MEMOIRS

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The one thing I don’t like about the table is the “Number of returns with a positive adjusted Gross Income” column.

So I make 50k/year, taking a standard deduction I get dropped to 25-30k AGI then I get taxed on that.
I think I worked out one time that on average over the past 10 years I am paying about 8% total Federal income tax.

What I want to know is what the average total income is, then what the deductions are.
I had a boss that decided that since he drove it around to customer sites from time to time, his Corvette was a write off. According to tax code it is (at least a % of it). Giant elaborate conference table – write off. Vacation, if done right, another write off. I don’t begrudge him or anyone having luxuries, what I don’t like is when, through creative manipulation of tax codes, they end up paying a lot less than their fair share. Granted, not everyone does get this break, but it sure seems as though the more you make the more creative you can be, the less total % you pay. I don’t buy the AGI. I want to see the before deduction income.

Solution: Personal income tax. 1 deduction for every tax payer. A tax payer is anyone making more than (say 20k a year, about the bare minimum to survive) You get to deduct 20k. You buy a house….Good for you. Have kids? congratulations. Donate to a charity? Hope that warm and fuzzy feeling you got was worth it. Still no additional deductions.
So if you make less than 20k a year you pay 0 taxes. (can’t get blood from a turnip).
If you make $20,001 that year? Well then you pay X% on $1.00 (Lets put x=10%)
if you make 200,000 a year, Well then you are paying 10% on 180k.

The more you make the closer to 10% you pay. Yes it is a “progressive” tax, but it sure seems to be the most fair in my opinion.

There are a few things I don;t know about, Say you make 30k but hubby only made 19k…
Not sure how to handle this, but I think hubby deduct 20k (pays no taxes) and you pay 1k.
So in essence no joint returns.

I have also entertained the idea of a 1% flat tax on ALL income to businesses, regardless of profit or loss. No write offs…period. So if you want to pay extra to be in a particular part of town then that is a business decision you live with. If you want to buy a Lear jet, then if status really means that much to you, then go for it – but no write off.

Issues I have are what about the mining company that has to buy $10 million pieces of equipment, or Apartment building owners, or the Limousine company? Not too sure how to handle that since being able to deduct those expenses probably are the only thing keeping them in business.

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BHF Reply:
January 23rd, 2012 at 3:12 pm

Also, wouldn’t it be nice to tie the ability to vote only if you paid something in taxes?

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Janna Reply:
January 25th, 2012 at 9:05 am

I am assuming you kidding about your last statement. Otherwise, in your world, that would mean that anyone earning under 20K (including the husband in your example) couldn’t vote? How about: the more you make, the greater number of votes you have? (Isn’t that how influence peddling works now?)

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If the over $1,000,000 earners would just pay the 35% that they are suposed to that would solve owr problems entirely. If $43/month from the bottom 50% is all we need as you state. How easy is it for the top 10% to give an extra $1000 a year. And why don’t you mention that the real taxes paid by the top 5% are lest than 15% because most of there money is in capital gains. Real Fair!!!

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Financial Samurai Reply:
January 25th, 2012 at 2:30 pm

Because the real tax rate paid by the top 5% is 25% and many times is higher.

Don’t confuse the top 0.1% who earn millions from dividends and capital gains at 15% like Mitt and Warren.

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I really appreciate you posting the numbers. When I tried to imagine how we might grapple with the deficit and debt it seemed impossible. Now it is clear that this is all quite manageable.

The may be many different formulas we could use, but to illustrate a simple solution, taxing the top 5% agi at 50% would completely erase the budget deficit.

There.

Done.

Next question?

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Financial Samurai Reply:
January 29th, 2012 at 8:33 pm

Probably best to tax the 47% who don’t pay any Federal Income taxes to pay for the budget deficit, no?

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Charles Reply:
January 30th, 2012 at 8:29 pm

I saw your point above about $43 per month and some tens of billions in extra revenue. Paltry, but fine. Let each citizen pay according to ability as long as there are reasonable accommodations for subsistence. How about education, healthcare, and some sort of retirement savings? I just think the people at the very bottom are already living hand to mouth and there just isn’t much you can squeeze from them.

The wealthier in society can afford to pay more during this time of national distress (top rates usually rise during/after wars anyway). The super rich can pay A LOT more. Lets just run the numbers and adjust the rates and balance the budget. This is totally doable.

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@Sam – I assume you mean that we should raise taxes on everyone since you think it is unethical to vote to raise taxes on someone else and not on yourself. Correct?

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Why doesn’t Mr. Buffet pro-actively pay more Fed taxes…. heck, he doesn’t have to wait for a mandate from the Feds, does he?

Also, it might be nice if his company would pony up that $1B in taxes they are fighting so diligently….. Interesting to say the least.

However, I STRONGLY disagree that anyone living in this country be absolved from even paying $1 in Federal “revenue”. Absolutely freaking crazy and ridiculous that 50% of the population pays 100% of the tax burden and something that CANNOT be supported for any duration of time (check out most of Europe… Greece, Spain to name a few countries).

If you could ALL please focus on the real issue of throwing welfare dollars AT the problem instead of AT the solution…. People do want jobs and a paycheck instead of a welfare check, for the most part. We need to lift people up out of poverty and help them gain a footing to support themselves, long-term. Continuing on as we are and growing the welfare base is the ruin of our nation!

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Janna Reply:
January 31st, 2012 at 9:46 am

According to this chart, the bottom 50% only makes 12.75% of the money and still manages to pay 2.7% of all the federal taxes. Do you really think that’s the best place to start looking for money? Maybe you should worry more about corporate welfare than at social welfare aimed at poor children.

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Cnile Senior Reply:
February 10th, 2012 at 5:46 am

Tammy…

Welfare is a small price to pay to keep “those people” out of our neighborhoods.

As long as we give them pittance in welfare, they will never be able to afford the good life as we know it.

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With federal, state, and local debt totaling more than $26 Trillion, and personal debt (including mortgages) is more than $14 Trillion, I wonder if there really ever was a “middle class”.

It appears the middle class was just propped up by debt. There is actually just the rich and the poor, as there has always been since economies where first established.

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What would be the point of having welfare recipients and food stamp recipients paying more taxes? The money would literally go straight back to them because they would be making less to the eyes of the government. The rich paying more taxes is a way to keep the middle class strong, because a strong middle class is a sign of a strong economy. If the middle class is growing, then things are looking up. If the middle class begins to shrink, the economy is weakening. The middle class does the spending and mediating between the poor and the wealthy. Most people have to be in the middle class. Not everyone can be executives we only need a few people to steer and its a fact of life that most people have tio do the work. It would also be inconvenient for the poor to be dying in the streets. (Certainly for them) since the very wealthy make much more than they nerd to survive, they don’t need the extra money. And if the fortunate ones want more money. Work more and earn more. But don’t take any money out of the hands and mouths of the people below you.

Just to assay any assumptions you may gather from reading this. I am not a recipient of any aid. But I have seen poverty and that should be inflicted on no one. I am a hard worker. I currently am attending school full time and working 35 hours a week. I do nothing but school and work because the reward at the end will ne worth it. I don’t aspire for more money than I could possibly spend in one lifetime and I value charity, even tough I make a small amount a month I give more than 10% of my income.

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Financial Samurai Reply:
February 10th, 2012 at 3:51 pm

How about the point of giving welfare recipients pride and a way out? By charging them even something to pay for the welfare, it may encourage them to figure a better way out.

Once you work full-time, and work for about 10 years, I think your views will be more for equality and having everybody pitch in, not just half the population.

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It’s easy to see the point of view that you’re coming from.

However, to ask those who can’t afford food to pay Federal Income taxes is kind of crazy. To top that off, you’re comparing those making less in a year than the average top 1%’er makes in approximately 3 weeks. That’s a pretty big difference.

Those in the top 1% are not struggling. Most own several different luxury vehicles, own several homes, and have millions saved for a retirement nest egg. Meanwhile, the bottom 50% are losing their homes (or could never afford one in the first place), have a hard time affording to buy food, and are barely getting by.

This coming from a middle-class earner who can at least understand that the wealth gap is greater than in any other country in the world in the last few centuries. I would hate to see America turn into a serf society, though I fear it already has.

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@Anita
I think your view of desk jobs is a little skewed to say the least. I’ve done both the demanding physical job, and the ‘supposed to be 40 hours a week’ desk job making the bigger money. They are both equally demanding in drastically differing ways.

I’m a classic cliche in that I put myself through school waiting tables. I worked five nights a week from 5 to midnight (later on fridays and Saturdays) and went to school full time during the days. The job was physically and emotionally demanding, and at times down right degrading, but worth every penny.

Now I work at a desk job in a cubicle. I’m at work by 7:30, and hardly ever leave before 6 p.m. Its far away from a physically demanding job, but mentally and emotionally… the stress is greater than waiting tables EVER was. My husband and I work our asses off (at our ‘cushy’ desk jobs) to put ourselves in the top 5% and happily pay our share of taxes…

I think that’s fair.

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Financial Samurai Reply:
February 12th, 2012 at 7:32 pm

There really is something to be said about the mental and emotional tolls of a desk job. I for one believe a difficult desk job due to whatever reason can be far more dangerous for one’s health long term.

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What many people don’t understand is that the economy is NOT a fixed pie. The wealthy are NOT getting wealthier at the expense of someone else. If you want more pie, then go bake some more pie.

If a farmer in a villiage developed a technology to increase crop production, sold it to farmers and in the process made millions, who is worse off in this situation? The answer is “no-one”. Farmers sold more crops and made more money, the people were able to afford the food due to the increased supply, and the entrepaneur made millions.

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Financial Samurai Reply:
February 13th, 2012 at 7:23 am

Good point! Those who add value gain more reward. I’m curious to read the rebuttals to your argument.

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Charles Reply:
February 13th, 2012 at 10:17 pm

That’s a nice hypothetical. Unfortunately the reality is that high stakes gambling/speculation by irresponsible people using other peoples money created tidy short term gains at the cost of crippling the economy. Globalization has also decimated the domestic supply chains (salaries, purchasing power, tax base, etc.).

The top tier earners have increased their margins at the expense of everyone else.

You guys really need to step back from the theory and ideology and look at what is really happening.

The farmer ‘innovation’ argument is naive at best.

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@Shawn Marie
that is your CHOICE to have a child. The real elephant in the room with this article is the losers who had to get loaded every Fri. Who spent every dollar they made on “spinners”, drugs, alcohol, video games. Who made fun of the nerds and accepted the job as a roofer because their parents finally kicked them out. Most people are not ambitious “self starters”. The NON-WHINERS in my life I can count on one hand.

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HI, I;m glad that you used the picture, and feel free to keep it there. however it is not the presidents dog, it is Baby, a puppy mill survivor. They were photographed for the book “A Rare breed of Love” to encourage the public to adopt, something he failed to do.

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