Ever wonder how much money do the top income earners make? When you know how much the top income earners make, then you can better shoot to be a top income earner yourself. After all, everything is relative when it comes to money.
Americans are rich by world standards. With an average GDP per capita income of ~$65,200, America consistently ranks in the Top 20 richest countries in the world. Many of the world’s top income earners live right here in our great country.
Other rich countries that have a higher GDP per capita than America include Liechtenstein ($139K), Qatar, Monaco, Macau, Luxembourg, Bermuda, Singapore, Isle of Man, Brunei, Ireland, Norway, Falkland Islands, UAB, S. Maarten, Kuwait, and Gibraltar. Countries with similar GDP per capita to America include Hong Kong, Switzerland, and Saudi Arabia.
If at birth, you had the mental capacity to choose where you’d like to live for most of your life, living in a top 20 richest country will more than likely help you become a top income earner as well.
Even if you end up being the most mediocre producer, you are still miles ahead of much of the world. Too bad many of us can’t pick where we want to grow up and earn a living. As such, it’s nice to understand how we compare against the rest of the world to give us some perspective.
Let’s take a look at what the top income earners make in America.
What The Top 1%, 5%, 10%, 25%, and 50% Income Earners Make
Based on the Internal Revenue Service’s 2015 database below, here’s how much the top Americans make. For 2021, the numbers are all about 10% – 20% higher partly thanks to inflation. Since the previous financial crisis in 2008 – 2009, the top 10% have widened the wealth gap.
- Top 1%: $380,354 and up ($470,000+ in 2021)
- Top 5%: $159,619 ($180,000+ in 2021)
- Top 10%: $113,799 ($130,000+ in 2021)
- Top 25%: $67,280 ($80,000+ in 2021)
- Top 50%: >$33,048 ($35,000+ in 2021)
The rich have gotten riche during the pandemic. Therefore, the top income earners are making even more than ever before. Sadly, the wealth gap has widened as we continue through a K-shaped recovery.
Summary Of Top Income Tax Data
Based on a previous 1000+ survey study on Financial Samurai in Fall 2020, about 80% of readers are in the Top 25% ($67,000+). Good to know that many of you are doing well.
The table also tells us a number of things about equality or inequality, namely that the top 1% of tax payers pay 38% of all income taxes yet only have a 20% share of total AGI.
Furthermore, the top 50% of tax payers pay practically all of the nation’s federal taxes (97.3%) while commanding 87.25% of total AGI. This table from the IRS is the source for the often politically bantered argument that 47% of American income earners pay zero federal income taxes.
If you do another little exercise and compare the top 25% of American income to the Top 10 per capita income countries in the world, you can once again see how lucky most of us are.
If only we could get all American wage earns to pay some taxes, it would go a long way to help shoring up our budget. Congress constantly holds the nation hostage by bickering over whether to cut $10 billion here, $50 billion there. All we have to do is encourage those who earn above the poverty line who pay no federal income taxes pay just $50 a month in taxes. We’d raise billions a year right there for example!
Let’s have everyone contribute to the welfare of our country. We are all in this together! For those who are just struggling to keep their heads above water, let’s lend them a helping hand.
The top 1% income earner in 2021 is now earning at least $470,000 a year.
Who Are The 47% Who Pay No Federal Income Taxes?
Roughly 47% of Americans pay no income taxes. However, the 47% of Americans who pay no income taxes fall into three groups:
The working poor. The earned income tax credit and the child credit can help families making $50,000 or more pay no taxes or get money back. About 60% of those not paying income taxes do contribute to payroll taxes, meaning they must have some source of earned income.
The elderly. An increased standard deduction for those over 65, and an exemption on part of Social Security earnings, means that many older Americans pay no income taxes. Please remember though that the elderly have paid their dues through decades worth of federal taxation during their careers.
The low-income. A family of four claiming only the standard deduction and personal exemptions pays no federal income tax on its first ~$26,000 of income. The standard deduction per person is now $12,550 in 2021. Further, each family gets a $500 child tax credit.
As you can see, being poor or elderly likely means you don’t pay net federal income taxes. We’re all going to grow old one day, so let’s give this group a pass. The elderly paid into the system, so let’s take care of them. I don’t think any of us would rather be poor so we can pay no federal taxes, so let’s give them a pass too.
This leaves us with a low-income group that may have made some suboptimal decisions such as having children while not being able to support themselves. Children are estimated to cost roughly $250,000 from the ages of 1-18. Perhaps having multiple children on a low income is not ideal. But, how do you deny passion?
Living In America Is Rich
If you work in America, you can see from a top down and bottoms up perspective you’re doing fantastic. If you are in the bottom 50% of Americans who earn less than $33,048 a year, know that you can earn more if you want to.
Half the battle is just moving to a vibrant location such as the San Francisco Bay Area where billions of dollars are flowing in due to technology innovation. It’s not like you have to brave the high seas to reach America. It’s not like you need to ride a horse for three months to get from New York to California. All you’ve got to do is hop on a bus or a plane to be where the action is.
25 years ago, I remember making $550 a month working at McDonald’s for $3.75/hour. With wages 3X higher now, I’d be pulling in $1,650 a month or $20,000 a year! Heck, tack on driving for Uber for 20 hours a week part-time at $36/hour and you’ll make another $2,000 a month and be in the top 50% of income earners no problem. There’s an entire gig economy out there for freelancers to make extra money after work, or freelance full time. Why not take advantage?
Please Put In The Work
If you are only working 40 hours a week or less and complaining why you can’t get ahead, you need to seriously re-evaluate your work ethic and expectations. Anybody can do it. You just can’t be delusional enough to think that you’ll be able to compete when everybody in the world who wants to get ahead is working 60+ hours a week and getting paid much less to boot!
Spend some time online understanding global wages from our biggest competitors in China and India. In order to maintain our incomes, we must constantly be updating our skills.
There are plenty of six figure jobs out there for the taking. You just need to have the desire, motivation, work ethic, and perseverance to get there. Did you know the San Francisco police chief makes $320,000 a year? Further, when he retires, he’ll get a $200,000 a year pension for life! It’s not just doctors, lawyers, venture capitalists, bankers, movie stars and athletes who make healthy sums of money.
A Variety Of Jobs Pay Well
Even my friend who is a union electrician and is not allowed to work more than 35 hours a week makes $120,000 a year and gets a $5,000 a month pension when he retires at 55. Let’s not count the $30,000 a year he makes doing side jobs with all that free time. There are six figure earners in practically every single industry, including the non-profit industry!
Back to my point where if everybody earns a million dollars a year, nobody is rich. Living in San Francisco, it certainly feels like most are in the top 5% of income earners ($159,619). Train janitors and elevator technicians in the Bay Area can make over $250,000 a year with overtime.
I’m sure many who live and work in Manhattan, and potentially LA and Chicago feel the same way. The cost of living is expensive out here, and that’s predominantly driven by high wages.
Combine two income earners with these amounts, and you can really start understanding why surpassing what the government deems as wealthy ($250,000) is not too difficult.
In fact, I argue that in many of the larger cities in America, you’ve got to earn closer to $300,000 a year just to live a middle class lifestyle. It sounds crazy, but it’s true if you take a careful look at the budget I put together and if you believe a middle-class lifestyle means owning a home, being able to comfortable raise two kids, and save for retirement.
The Top Income Earners Pay The Most Taxes
The top 1% of income earners will likely continue to pay a higher percentage share of overall income taxes than their share of income justifies. If things were fair, the top 1% would only have to pay 20% of total income taxes since 20% is their share of total income. Alas, the rich pay almost double what they owe.
Therefore, it’s not worth constantly demonizing the rich for “not paying their fair share.” The rich are the ones who donate the most and employ the most people in the world.
On the flip side, the bottom 50% who earn 12.75% of total earnings only pay 2.7% in total taxes. But, as we learned above, most of the bottom 50% are elderly or poor. Nobody is asking the bottom 50% to pay more taxes.
It’s impossible to create a fair tax system that everybody will agree on. But we can look at the data to understand who is making the most and least income and paying the most and least in taxes.
It’s great to be a top income earner. However, it’s even greater to be happy. Find your balance!
Here are three things top income earners do below.
Top Income Earners Are Entrepreneurial
We are in the technology and internet age now. If you really want unlimited earnings potential, you might as well be your own boss someday. It costs so little now to just start your own website so you can brand yourself online. Your will connect with like-minded people, find new jobs and consulting opportunities, and potentially make a healthy living online. Take a look at this income statement example of a friend with a simple personal finance blog.
I started Financial Samurai in 2009 as a hobby to help make sense of the financial destruction back then. Two and a half years later I negotiated a severance because I was making roughly $80,000 a year from this hobby. Nowadays, I’m having so much fun and earning great supplemental retirement income.
You can start your WordPress site like this one with Bluehost for as little as $2.95 a month. Come up with a unique and memorable domain name, find a free website theme, connect your hosting and you’ll be up and running in 30 minutes.
The best thing you can do while you have a job is work on your side hustle during off hours. You never know what might happen if you just start.
Top Income Earners Track Their Net Worth
The other action item wealthy people do is track their net worth. You can only truly optimize your wealth if you know where all your money is going. Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances.
I’ve been using them since 2012 and have made much wiser financial decisions since. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. The tool will show you exactly how much you are paying in fees. Further, it will give you insights into your asset allocation. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible. Your financial future is too important not to take it seriously. You don’t want to end up old and not have enough money because there is no rewind button!
Top Income Earners Invest In Real Estate
Real estate is one of the favorite asset classes to build wealth by top income earners. Real estate is tangible, provides utility, and generates valuable income. With mortgage rates staying at record-lows and more people working from home, the growth of real estate will likely be strong for years to come.
Top income earners invest in rental properties for cash flow. Given interest rates have plummeted, the value of rental income has gone way up because it takes more capital to generate the same amount of income. Top income earners who really cherish their time also invest in real estate crowdfunding to earn income 100% passively.
Fundrise is the best real estate crowdfunding platform where investors can invest in private eREITs that invest in hundreds of properties across America. By investing in a diversified fund, investors gain real estate exposure in a low volatility way. Fundrise is free to sign up and explore.
For accredited investors who like to invest in individual deals, take a look at CrowdStreet. CrowdStreet focuses on commercial real estate opportunities in 18-hour cities. 18-hour cities have higher growth rates, lower valuations, and higher cap rates than 24-hour cities. Think Charleston, South Carolina versus New York City, New York.
Due to demographic shifts to lower cost areas of the country, the closely vetted CrowdStreet deals in 18-hour cities look to be attractive. CrowdStreet is also free to sign up and explore.
Personally, I’ve invested $810,000 in 17 real estate deals across the heartland of America. The income is completely passive, and I get to diversify my real estate holdings away from expensive San Francisco. As a father of two young children, I really appreciate not having to deal with tenants and maintenance issues.
Supporting the idea that working over 40 hours a week is a good way to live life is at the least misguided and at the worst wrongheaded.
Please take time to review what happened to the majority of those who have choose to work 40 plus hours. Many of them have shortened life expectancy, more chronic illness not even to mention their relationship outside of work are quit poor. This holds in other countries as well. Modern work environment is not a healthy place to spend huge swaths of our time.
Agree and disagree. 40 hours a week isn’t that long IMO. But I did burn out working 60+ hours a week for 13 years and as a result, left my day job in 2012 at age 34.
See: The Ideal Age To Retire Early And Minimize Regret
Liz, you work for what you want. Although this is 2020, and we should expect some comments about health and wellbeing, it’s also 2020; a time when opportunities to hustle have never been greater.
I’m working three jobs. Not because I have to, because I want to improve myself and the life of those around me.
I’ll be extremely likely to retire early as a result.
Thanks Sam. Your financial blog is amazing, I highly recommend it.
This is why I think it’s unfair. And the rich don’t pay enough, My easy way to look at it. All math. Use a roll of toilet paper. Each square is $25,000 in income. after 9 squares the 1st 6 brackets are covered. Yes that covers all the way to $204,102 and these people pay 35% in taxes, So they pay 71,435 in taxes and keep $132,666. go 13 more squares and the finial 7th bracket is covered $510,301 and they pay 37% taxes they pay $188,811 and they get to keep $321,489. so this is when taxes are not fair. But lets go on because if that is screwed up. Then check this out. we have just reached the 22 sheet. these rolls has 350 sheets in 2017 Bill gates made over 4 billion. You make sure you taxed the poor 10% and the middle class 22% so what about bill gates will lets look. it will take 114 more rolls to hit his income he made. But he only paid 37% on 4,000,000,000 and the disabled vet paid 10% on that $1,000 over the $24,000. then you have the nerve to say you need to work harder. how many people get rich stealing from others. How many ran a scam to get rich quick. you rich always want to raise our taxes. and lower yours. I don’t care what you pay but it should be like in the 1970’s at 80% you know Bill Gates would still make $80,000,000 after taxes. how much does a person need. Just enough to buy the congress right.
You did not look at the figures. Otherwise, you wouldn’t have that rediculous example. Half of tax filers don’t pay federal taxes yet they benefit. The ultra rich will always have avenues to mitigate liability, but they still pay a large share. Errbody needs to pay A share.
regardless of whether I agree or disagree that rich people pay too much or too little, I am disappointed in the question “how many people get rich stealing from others”. Perhaps we differ on the definition of stealing, but I just don’t see it that way.
But even still, just because someone might have done something wrong, you argue we should punish everyone similar to them. By that logic, we should cut all medicare, medicaid, social security, and other social services because “how many people steal from these programs” Your logic is divisive and flawed.
I think the fundamental question is what is equal, proportionate, or equitable, and what goal are you trying to achieve? Is it a balanced budget, fairness, encouraging income or wealth, etc. And rather than calling out extreme examples (i.e. Bill Gates or the vet) look to people in the middle of each bracket and what each policy would mean for them. With such varying costs of living, many people in these brackets, would struggle with increased burden. At the same time, many would face economic challenges if we cut back on spending. I think many people believe there can be more brackets, and higher taxes as we go up, but we also have to balance that with the reality that taxing the top fractions of a percent of earners won’t solve the budget challenges. While it may make people feel better, and could be argued as more equitable, it is certainly less equal and proportionate.
The top 1% don’t make $360K.
That is the split point, i.e., the minimum for that tax bracket.
Because it is not readily provided by the press, the Progs always imply that you need to make millions to be in the Top 1%.
And economics is not taught in schools anymore.
They are teaching islam instead.
Correct, that’s the minimum amount to be considered a 1% for that year. Even among the 1% there is a big divide of the working class doctor and. millionaire business owner.
You had me until your racist comment about Islam. It’s the largest religion in the world and does teach fiscal responsibility. Don’t judge the 1.8 billion Muslims in the world by a fraction of a percent of violent extremists and corrupt oligarchs who corrupt the religion. Otherwise it would be sound to judge all Republicans In the US by neo Nazi and militia violence, the majority of domestic terrorism in the US in recent years being perpetrated by white males preaching conservative allegiance.
FS,
Great article.
The IRS data is (for certain) very accurate but I wonder if it paints a picture that there are *less* well-off people than there actually are. If so, your point is proven even further.
Here is why I think the incomes reported to the IRS are lower than we realize:
* Small business owners are notorious for avoiding taxes by making everything a business expense
* Many high-paid freelancers such as hairstylists, makeup artists, photographers, painters, roofers, etc prefer to be paid in cash and also receive cash tips. This doesn’t apply to all their contracts, but they may receive a share of their income in cash.
* The “landed” well-off tend to derive their income from their assets. They only pay taxes when they realize gains on these assets, whether it is stocks/business income/real estate…
Almost all of these high earners come from the self-employed and entrepreneurial corner.
Anecdotally, there is a large number of expensive houses in US cities. Far more of these “wealthy” houses than there are high income earners if you go by the IRS definition.
What do you think? Is the income data skewed downward?
Not sure actually. There’s a lot of stealth wealth in America because of populist angry towards the wealthy.
Also, the average net worth in America is pretty huge now at $693,000 according to the Federal Reserve.
Actially adjust gross income is a bad way to tell. The main complaint is the wealthy have so manyloopholes available to them to get out of paying taxes. Those loopholes and breaks get applied BEFORE agi is calculated. It seems alll the info on gross income of the 1% has been censored but the last data I saw was in 08′ the 1% make 80% of the income before deductions. By 2018 they had 90% of the total income before deductions. So if that 90% gets adjusted down 80% I would say thete is an issue. Comapre that to the average earner at 63,000 who gets adjusted down to 38,000.
It’s crazy how poorly the top income earners are treated in our country. They are the job creators and the biggest tax payers in the entire nation. I believe there will always be resentment from the middle class toward the rich.
This resentment is exactly what makes it hard for the rich to want to have a healthy dialogue with the middle class. It’s definitely an issue to keep an eye on as wealth/income inequality continues to grow.
I get tired of hearing that the wealthy don’t pay their fair share. I ask my left leaning friends what is a “fair” income tax rate. Almost none of them have an answer or if they do it is less than the effective tax rate that my wife and I pay(44.1% last year on our gross income). My tax rate if I would have stayed in California this year would have been 37% federal and 13.3% state. My wife is an executive at a fortune 100 company so all of my income is taxed at the highest marginal rate. If you add social security(on most of my income) and Medicare taxes, my effective income tax rate would be about 59%. Is it right or “fair” that I have to work for the government for 7 months every year before I get to keep any of my income?
We made the decision for me to retire this year and move to another state with lower taxes. It was no longer worth my time to go to work when most of my labor was going to pay the government. We no longer employ a gardener, pool service, or nanny which amounts to about $1900 per month in savings. Along with the income tax saving and lower property taxes, our take-home pay is nearly identical to when I was working(My salary and bonus put me in the top 5% of income earners) Many on the left don’t realize that as you increase the marginal income tax rates people will work less or like me, stop working altogether. I’m guessing now that the SALT deduction is capped at $10,000, the high tax states will find out that a lot of their citizens will be moving out of state like we did to escape the exorbitant taxes.
The other fact that gets overlooked is very income level are fluid throughout someones life and very, very few stay in the top 1% for very many years. 73% of Americans get to the top 20% of income for at least 1 year of their lives. Only 0.6% will stay in the top 1% for 10 consecutive years. Many view the 1% ers as a group that is born that way and stays there their entire lives and that is the exception rather than the rule.
Whilst I agree with everything you’ve written some people don’t want to make more money, although they do want to complain about not earning enough! There are two types of people in this world – the talkers and the doers. It’s the doers who make shit happen – most people reading this are doers -> go and get everything you deserve!
Hi,
Lord’s blessings to you, your family, friends and colleagues.
Profanity and colorful language is
painful to me.
I usually stop reading and listening when I hear & read it.
I automatically assume the person is not literate/ well read.
I gather they are not reading books and they do not have the words to describe their point or feelings. I could be wrong.
People like me who avoid profanity and colorful language stop reading/ listening when they experience it.
I hope my feedback was helpful.
In recovery meetings there is a saying, take what you like, leave the rest.
Blessings,
Sam
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FullyFreeFilms.com
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Romans 3:1-25
I love this blog! I am in the 94th percentile in terms of net worth, according to the online calculators, but I certainly don’t feel “wealthy.” Reason is that I was talking to a buddy of mine that has also done well, and we conclude that when you make it, you are even more protective and appreciative of what you have and what it took to get there. I think that many times folks need a win, a boost if you will, to give them some confidence. It pays to to walk the line in every regard (e.g., don’t drink or do drugs, don’t get into debt, get a lot of education, always retool your skills, network, etc.). Any know that one thing can bring down an entire lifetime of work in an instant. Boring makes wealth, and that often means spending more time in school and staying up late working on your moneymaker instead of hanging out at the local bar all night.
Hi Sam,
Great post. I agree with you; if you want to be rich be your own boss. Luckily, blogging helped me to become a full-time blogger and be my own boss!
Thanks for sharing!
Just noticed Joes comment about “lazy zionists”, whom probably went to Harvard and out earn him 20:1, but whom, probably, aren’t even Jewish.Most Billionaires, Gates, Buffet, Slim, Trump aren’t. Some, like Zuckerberg, are. None are lazy. You sir, are lazy.You blame others for your own troubles.
You are a also a bigot, and I’m so glad you will never be prosperous.
If I could take away the Salk vaccine(damn Zionists), lasers and GPS (damn Einstein), the atom bomb that won the war (damn Einstein Slizzard and Oppenheimer) from your life I would, but alas, you benefitted and ignore it. Over a third of US nobel winners were jewish, hardly lazy eh?
To Financial Samurai: read the comments. While religious bigotry probably isn’t contagious to anyone with an IQ over 100, leaving those comments up is like forgetting to flush the toilet.
Bob
I love that phrase “forgetting to flush the toilet”.
Bigotry is just wrong and here, inexcusable
Most comments are fair enough and there are anecdotes for every reason why someone can or cannot get ahead. I believe there are simply not enough opportunities in the USA for well qualified people to get a paying job that is reasonable to their potential. Rather in my world, I’m often seeing lesser qualified people (for many reasons) running the show and making most of the money. Let’s not forget about luck. There are some people whom are just lucky to have been given the opportunities they have. Not saying these folk are not hard working, just saying they were more than likely not the best in many ways to get a great paying job, they were just lucky……Working 50+ a week may be needed at times, but I don’t think people competing in that or standardizing that is good for our society, nor should it be necessary just to get ahead in life.
Money goes to people’s heads. Everyone can discuss all the anecdotal evidence they want, but the concern is the distribution. Yes, if you work hard, you have a chance of succeeding, and some people do. But more of the people that work hard should succeed.
This doesn’t square up with our taxes. Under $300000 and paying 28% as homeowners. Working 60 plus hours. We would love to pay 23%.
Start a side gig and deduct the losses until profitable, then the operational expenses. Refinance tour mortgage at 3% and invest your savings. So many ways to gain an edge fairly but we don’t really h finance well enough. That said, most bankruptcy is medically related. Im all for opportunity and a stronger safety net.
Excellent article. I will add that living your life being grateful for what you have and counting your blessings is a surefire way to be happy. You can always be worse off, and if you complain too much, the universe might teach you that. Love your life!
Thanks Sam. Your thoughtful insight is always appreciated. Got some new financial goals to strive for!!
I think there is a flaw in this logic here, the top income earners at 380k, this figure is probably only taxable income for a year, there are many other ways this group gets rich that aren’t accounted for here.
the gap between the wealthy and poor is huge, much more so than its made out to be here. Its obvious when the owners / majority shareholder / CEO’s etc have personal jets and multiple houses but the people who clean their buildings make minimum wage.
there is also the problem that minimum wage puts you in the “poor” category
I agree with the statement that we are doing better than most of the world even in the poor category, it beats living in Saudi Arabia or Iraq etc, and there are many more 3rd world countries than 1st world ones. However that doesn’t mean there isn’t room for improvement
I also agree that the working poor and the elderly have a completely legitimate reason for their taxable income.
I do not agree that people who cannot afford children and have them anyway should be given a free pass, this is a policy that creates more financially dependent people by not being a financial burden on this group, however this statement is only true if we start providing health services like abortions and such and stop letting religious extremists prevent us from doing so. if abortion is available to this group, they should suffer a higher financial burden for each child they have rather than getting more credits and everything. I hate to say this but we need incentives to make this group of people think twice before creating more burden on our financial situation
I also don’t agree that we should thank the rich, yes the American economic system has provided us with so many technical advancements, but these 1% or .5% etc. have many lawyers and tax professionals at their disposal to help them exploit every tax loophole possible where the average American with mere basic knowledge of how this works and files on turbotax does not. Much of this money is not treated as personal income either since its tied to business. say a CEO is the majority shareholder also in a company that does not pay him dividends, his company grosses 1 billion dollars in a calendar year, have of this in foreign banks and so forth due to outsourcing jobs, where is this money accounted for? its not shown here to really show you the gap in income.
I have two problems with an otherwise informative article. The author declares that people shouldn’t have so many children yet conservatives scream about providing birth control or abortions for those with low incomes. The author also states that to move up in income, the poor can simply work more hours in their regular or a part-time job, yet again, conservatives scream about the poor not spending time with their children and their lack of parenting skills. I also don’t see the moneyed class helping to provide decent child care so the poor can improve the job status. This article simply shows the hypocrisy of the wealthy and conservatives in our society and provides an alibi for their “I’ve got mine and to hell with the rest of you” philosophy.
Hi Lee,
Don’t give up! I’m the author of this article and here are some articles that can help you forge forward:
How To Make Six Figures At Almost Any Age
Spoiled or Clueless? Trying Working A Minimum Wage Job As An Adult
Abolish Welfare Mentality: A Janitor Makes $271,000 A Year, So Can You
I don’t mind getting torn up in the comments as I realize a lot of people are frustrated and angry about something. The comment section helps alleviate that stress. But at the end of the day, it’s YOUR LIFE you’ve got to take control over. After the venting is done, take action to change it if you are not happy.
Best,
Sam
I graphed the income distribution data for 1967, which is within the range from 1960-67 in which we had the most balanced economy in terms of not having swung overly far toward a government induced equality. Yet it was still within the years with relatively high equality, that is, not nearly the extreme inequality we have currently. 1967 was the first year for which I could find solid data for the 1960-67 range.
I also graphed the data for 2012, a year in which inequality was fairly extreme. Both sets of data were graphed on the same chart and the income represented logarithmically so that we could get salaries ranging from $1,000/yr to a million/yr on the vertical scale. The horizontal scale represents percentile linearly from 0 to 100 so you can see exactly how the income distributes across the total population. The 1967 graph was significantly kinder to the lower 20% of the population than the 2012, despite being in the days before there was much reduction in the earlier intense economic and educational repression of minorities, including repression of opportunities even for well qualified minorities.
I then assumed that equality is not a natural goal. We all have different levels of both ability and motivation to earn. So for me, the famed Gini Index is based on perfect equality as an ideal. In my view, this is fundamentally unnatural and therefore fundamentally misinformed. This and the assumption of zero-sum game economics is the mistake of the far left as well as Marxist thinking in many respects, although they are usually not quite the same thing.
The graphs of 1967 and 2012 were both similar to the way a normal distribution would look in this graphic format, with income represented logarithmically. Both these sets of real data look essentially linear as plotted on the vertical logarithmic income scale versus horizontally linear percentiles between the 30th and 70th percentile. In this format, that translates to a straight line that multiplies income by the same factor for the same distance we move horizontally anywhere along the line representing an increasing percentage of the population with less income.
So I decided to postulate an ideal distribution that was similar, but with a slope that was as much less steep than the 1967 graph as that graph was to the 2012 graph. Put another way, I hypothesized an ideal situation in which the distribution would be as much better than the 1967 as 2012 was worse. Just like a normal distribution of IQ or the length of our noses, I hypothesized that the combination of ability and motivation to earn in a homogeneous population that had no repressed minorities would also be normally distributed.
I therefore made the slope of the linear section lower than 1967 by the same amount the 2012 was higher with the income distribution perfectly normal under this condition and in this format. This ideal consequently represented a true normal distribution instead of approximately normal as in the real data. All the data were modified in a manner that reproduced exactly the same distributions as the original data, but which assumed equal total income for equal populations. This is the only way to compare apples to apples.
It was amazing how much better off the lower 50% in the ideal distribution was while the upper 20% hardly sacrificed a thing. There was even an inflection point at the 70th percentile at which all three graphs were at the same income. Nevertheless, the very bottom still had people who were earning less than would be necessary to live on. I assumed that this will always be so, just as there are always people with very short noses or very low IQs. We need to do something about that if we’re going to be a gentle, compassionate society without our heads stuffed way up somewhere very unrealistic.
Then I looked into the question of how much the top 30% would have to sacrifice to allow the lowest 30% to live in minimal but adequate comfort. These populations are outside the middle linear section on all three graphs This also made no assumptions about how to implement the distribution; no assumptions about government or any other kind of involvement. I merely looked at income distribution with no tax assumptions or any kind of specific safety nets. The question was simply how much raw, untaxed income would the top 30% have to sacrifice to create livable conditions for all in the lowest 30%. On the hypothetical ideal distribution I found that only about 7% of the average income from the top 30% would provide a 24% boost in the average income of the lowest 30%. Of course, in practice it would be more sensible for these average results to be progressively distributed on both ends.
Now if you’re going from around $25K/yr to over 31K/yr, that makes a huge difference in your potential quality of life, assuming you’re not addicted to alcohol, gambling, crack, or heroin. The difference is still greater for the extremely low incomes assuming a graduated relief scheme. If you’re going from 100K/yr to 93K/yr, that has enormously less impact on your quality of life. This is even morally justifiable in that those on the high end of the income distribution typically use a lot more public infrastructure than those on the low end. It is only right that they pay for it accordingly. I found this to be a very interesting and informative Gedankenexperiment (i.e., thought experiment, a term first made famous by Einstein, who used Gedankenexperimenten to develop his theories of relativity, not that what I’ve done is anything comparable in case there is anyone silly enough find the motivation to assume I think so).
Some very awkward statements are being made here: “A poor guy can go make $30+/hr. with Uber” – he cannot even buy gas to get to a bus station; also, I would very much like to be able to pay at the 23.27% tax rate of the average top 1% of earners. It would leave me $291,845 on which to make ends meet. Yet the lower 50% of earners only have less than $33,048 before taxes. If in the higher earners (those 25% averaging $67,280) paying 15.68% average, there was a doubling of taxes, their after tax amount would still be $46,180 or over $13,000 more than the gross of those at the 50% level. It is not the 1% that need to pay more but those 50% or below should be returned double the current withholding amount to encourage more working wage earners. Give us more information on the top 1/10 % of earners (those 140,000 earners, or 10% of the top of the 1%): How much do they earn? What would be the potential tax reduction for the balance of earners if they paid 50% over $500,000 in earnings; stepped up to 75% for those earning over $100,000,000? Since we are being told all this other historic information, educate everyone on the potential changes a few various scenarios could give and show that this would eliminate the US national debt. Using knowledge attached to computers could help everyone be more understanding and more unified.
In my opinion, it is reasonable for rich people to pay more tax because they use more resources than poor people. Moreover, rich people can make money easily with stocks, capitals. Generally,working more than 40 hours per week is not a good way to become rich. The first step is to have a good financial plan, so one can have an egg in his hand. Then he can hatch this egg and wait patiently for a few hens.
The biggest problem with this article, is the assumption that the ultra wealthy make money by working. They make money because the return on capital is greater than the underlying growth in the economy. If you have even a basic level of mathematical competence, you can recognize the macro economic implications of this. Capital will accumulate in the hands of the few, not due to their hard work, or expertise, but because they already have more capital. We no longer have capitalism, we have financialism. The economists, the policy makers, the politicians, everyone has been corrupted by the financial sector. In a real capitalist economy, finance is a support function. In financialism, it is a profit center, and this structure can only be supported in an environment of private sector credit expansion. It is also essentially a system of theft. The financial sector is stealing the wealth of the nation, while adding no real value. It is sad that people are too stupid to recognize it. A start is reading Pikkety’s Capital in the 21st Century, or listening to Michael Hudson.
It’s always better to focus on equity and wealth than income. B/c income gets taxed. Wealth skates on by.
See: Focus On Building Wealth Over Building Income
On what planet do Uber drivers make $36/hour? That’s… way off.
I do. But actually, I make closer to $100/hour due to making money through referrals. It’s all about leveraging the internet.
See: Blogging For A Living: How Much Can You Really Make?
You are leveraging an angle, and if enough people do that, the angle goes away. It is the same for most of the recommendations you make. If they were done by a significant portion of people., they would cease to be an angle worth working. Most of your advice will work for a few people, but they are not suitable policies for widespread application.
Hi everyone. I have a big issues with those who complain about their financial position. I’m 29yrs old and a Financial Planning Director at a fortune 500 firm. My wife and I are in the top 10% of wage earners in this beautiful country and I was NOT handed my success. People in my generation seem to have forgot what this country allows us. Freedom and democracy (yes, more of a republic) allow you the privilege to work and fight for your dreams. Too often people think they should be handed a certain lifestyle as it’s their right. After putting myself through community college, while working 40hrs a week, it became clear that I needed a 4yr degree to achieve the lifestyle I wanted. I didn’t complain about the cost. I went out and obtained a student loan to cover only the cost of tuition and books. It’s paid off now. Only had to take out around 20K. I roomed with a few other guys to save money, had two jobs totaling around 53hrs per week (I was making over 3K per month in college!), took more classes per semester than the average (night classes mostly), was involved in intramural sports, was apart of a fraternity, and was dating my now wife the whole time. More importantly, went I started all of this there was a month when I had $1.87 in my checking account and $0 in my savings. My only credit card was maxed out and I was dead broke. Instead of giving up or reaching out for a hand out I put my head down and obtained that second job. I didn’t have time to drink, smoke, watch TV, or spending money all of the crap most of us think are fixed expenses. Wake up people. Stop complaining and work for what you want. If you don’t want a big house, early retirement, kids, traveling money, or nice cars then don’t work hard. You get out what you put in. It’s that simple.
A second option is to concentrate at getting better at what you do so you can command more money per hour and work less. I have a small painting business primarily residential repaints. I worked hard at it and worked long hours for many years. I never felt I was getting ahead even though I did have a good life I just seemed to miss too much of it while I worked. I set a goal to earn the same relative amount while working far fewer hours (20 hours per week) I set about doing this by concentrating at being better and faster, raising my rates, and increasing the number of bid opportunities so I could be more picky about the jobs I took. It took me seven years but three years ago I met my goal. I work around 1000 hours per year and have an income that allows me to own two reliable vehicles a 3 bedroom one and a half bath house on 8 acres and the time to enjoy it.
An extra 5% tax on the bottom 50% of wage earners, by your own numbers, would produce about 54 billion in taxes. An extra 5% tax on the top 50% of wage earners would more than eliminate the deficit. (And yes, I would be included in that, I’m somewhere in the top 10% by your numbers.)
In order for the bottom 50% to pay an addtional 5%, they would need to sacrifice food and housing two weeks a year, since pretty much all of their income goes to those necessities. In order for the top 1% to pay an additional 5% a year, they wouldn’t notice the difference.
And many in the bottom 50% are already working multiple jobs, much longer than 40 hours a week in order just stay where they are. 80 hours a week at minimum wage is still in the bottom 50%, again by your numbers. And of course, working that sort of schedule leaves you to tired to do much to improve your life. To say nothing of child care costs, eating out more because you don’t have time to cook, etc.
To borrow a phrase: Why do you tax the rich? Because that’s where the money is.
I would agree. Everyone should have skin in the game, but expecting to erase the deficit on the backs of the poor seems pretty callous to me. Poor and working class people already pay taxes well and above the federal income tax: State taxes, property taxes, licensing fees, sales taxes, gas tax, etc…. This includes those who pay NO federal income tax at all.
While it is true that the top 10% of income earners pay over 69% of all taxes, the top 10% by wealth also control over 71% of total US wealth. So while income and wealth don’t always correlate, the burden on the top is probably about right and should probably be even higher on the ultra-rich – those with incomes over 5MM per annum.
There’s an interesting article in the New York Times today on how “Top 1%” income varies by a factor of 10x depending on where you live…
To be in the top 1% of incomes nationally, you need to take in a minimum of $389,436. In New York (Manhattan), you need to be making $1,425,000 annually to be in the top 1%. People making $389,000 in New York are only in the top 10% for their region!
https://www.nytimes.com/2016/09/25/business/your-local-1-percenters-may-not-be-as-rich-as-you-think.html
There’s 168 hours in a week you do not need exactly 8hrs of sleep per night 6-8 hrs is suffcient, some people need more some need less. Anyways that gives you roughly 120hrs you can be working…and for anyone who wants to only work 40 don’t complain when i’m under 30 driving a maserati, owning two business with a vacation home and retired before 40 and 100% debt free and making 6 figures doing nothing because i chose to hustle my ass off and build not one, but two business and invest in myself. You need to find a demand for something, and supply it… You are either helping someone else follow their dreams or working on following your own. 9-5:30 are bankers hours. In order to get ahead you have to be above average and do more then the average person…
Thanks for sharing your thoughts! Banker hours are more like 9am – midnight actually, but who’s counting. I used to get in at 5:30am and leave at 8pm all the time. Killed me. Got fat. Got sick more often. But it helped me break free at 34 due to aggressive savings and good income. Back in shape.
Related:
The Average Net Worth For The Above Average Person
Are There Really People Who Work 40 Hours A week And Complain Why They Can’t Get Ahead?
Obviously the people who read this article and agree with it have never had a need and only know how privileged people live. I would like to know how a person raised on a 40 cow dairy in northern Minnesota who started working at the age of 10 5am get on a school bus at 7 am arriving at school 8: 20 return home at 5 pm finish chores around 7;30. At age 15 work 20 hrs on weekends to buy a car and pay insurance. During the winter months never getting paid more than 20$ a week for working 7 days a week on family farm. And 100$ a week during weekends.. from 1979 to 1987.. who’s parents never cleared more than 1400$ a year even though they worked 7 days a week no less than 12 hrs a day every day of the year never missing a day no matter what, sick or injured make more money? Then join the United States military making 700$ month after 7 years making 1100$ Even though being promoted 6 ranks before being injured and discharged..attend 5 years of college becoming educated take a job starting at 24,000 after 7 years making 25,500$ quit after working 140 hrs in 13 days with no overtime being salary. Get denied a 1$ hr pay raise quite to find better job spend two years unemployed applying to more than 40 jobs in 20 different states. Have to take a minimum wage job at age 32 bring home 48$ a day , even though owning 3 homes. Finally due to military injuries can no longer due physically the only work I know. Become unemployed, apply for veterans disability in 2004 have to sell everything except for the home I live in.. no children or family. Wait 7 yrs and day that sheriff is going to evict me from my home finally get approval from va for 100% disabled save home and pay all debt in 2011 . Lose ssi due to being unemployed for more than 5 yrs and now live on 3000$ a month unable to ever make more… no savings no 401 or stocks no assets..age 50 no ssi till 65 but will have to wait until 70 just to get more than 700$ a month…. so please tell me how I can get rich you uppity privilege fucks who obviously don’t have any clue what it means to work your ass off only to be looked down on by your arrogant ignorant ass! Non of you ever gave or served anyone but your self! I have never been able to live how I would want to because my military service left me having to live the best I can but now knowing I sacrificed my life so you can tell me I just need to try harder.. it makes me sick to think my life was wasted giving you your easy life and for what. A ignorant President who has purposed reducing my benefits from 3000 to 300 and letting ssi give me the 700 $ that I earned working 21 years never making over 25,500 a year until now on disability that I had to give lord and bone to get…every person making 75,000 a year should pay no less than 40% taxes why? Because you owe people like me with out people who sacrifice their life you would have nothing! Your food comes from people who work sun up to sun down most never make more than 10$ hr many make less just so you have cheap food… you have no clue how much you would pay if farmers were paid the same as you! If the people who feed you or ensure you are safe by protecting this nation made what you make! Which is what they should and you should be working for minimum wage or less… non of you provide food or security for anyone but your self…think if you had to pay 10 x more for your food you wouldn’t think it’s so easy to just work harder or you just need to want it more…pathetic take a long look at your life and honestly answer what is your true self worth when your life is only possible because of me and my people….I grow most of my food I have never needed any one of you yet you have needed me and my kind every day of your life and you have no clue till now! Please I want you to look at how the American farm is suffering from the trade war. Look at how 22 veterans commit suicide every day because they are broken providing security for your privilege ass… and now American farmers have surpassed veterans in this on average 25 family farmers are killing them self… so please enjoy your safety and enjoy your meals because the truth is it is covered with our blood just so you can think you have what you have because you earned it when really it has been given to you and you have never deserved any of it.
I know that I am not a proper writer so you don’t need to point out my dyslexia I know. But I really do want to hear what you have to say.. it will only provide more proof of the things I have said about you by the way you reply… I know this also… but I am still looking forward to seeing your message.
Your humble servant.
R Wacker
Disabled veteran
Army 86-93 Staff sergeant
North Dakota state university
92-95 deans list honors
Alpha Gamma Rho
Mr Wacker, thank you for your service to our country. Now, did you do it for free? You act like there wasn’t a benefit to you. Didn’t it allow you to escape that miserable farm job for $1400 per year?!
What’s with the hating on people making more money than you? Did you serve them or not? When I give someone a gift, I don’t expect a return. When I service someone as a professional, I expect payment that is fair market or fair payment from my employer. I wouldn’t spend 7 years there for a measly $1500 raise over that time!! Geesh man, have respect the your skills and time…. move on to something else or somewhere else to get your worth instead of boiling over with anger and resentment. I had kind of a similar situation with my last job, also of 7 years. I started it in 2011 during a down economy in healthcare…because Obama wrecked the healthcare and student loan industry for years. I went from making $70k range per year to $140k with a 10% of income into my 401k as benefit. Sounds nice huh? After the gubermint took a huge percentage of it to taxes then kicked me in the nuts further by not letting me write off any of my $1200 a month payment towards a $300k student loan debt at 6.5 to 8.5% interest! That’s thank you fuck tard Obama. I could explain that further but you numb nuts wouldn’t get it.( I went back to school in 2008) All I’ll hear about how rich I am. This was 2011 time frame. Health costs also sky rocketed to $1200 to 1400 a month as a high deductible cost plan…again thank you fuck terd Obama. So, because of the economy he worsened and increased unemployment, I was stuck in my job too…until changes in 2016 when Trump unleashed this monster economy. Oh, btw, I doubled my income before but had LESS money in my pockets. Let that sink in. I didn’t buy anything new either; kept same house and cars etc (not 3 houses!). That also required a huge sacrifice of time, energy,and stress. Plus that 300k investment. I had to sell an awesome home I built to pay off 150k of that school loan. So here it is 2019 and was at 150k something earlier in the year. I paid 1100 to 1400 per month since summer of 2011. The original loan was 150k then went to 180k over the course of school. I have paid in 115k but the balance was still 154000!! Boo fucking hoo right?Now it’s 139k. No worries, since our GREAT prez fixed things and the economy is humming, I changed jobs and can make extra money if I choose. This year I will make 222k with additional hours increasing that to 258k then an extra job adding just over 10k. Instead of degrading me for getting my keep you should congratulate my work. Now, there are some downsides to this money I’m making. I travel by plane every week on my dime and stay away from my family 7 days working 104 hours then I’m off 7 days unless I choose to work a little bit although I haven’t yet. I work nighttime, holidays, and weekends. I deal with life and death in high stress situations. I had to go to expensive and stressful training spanning a little over 8 years total. It’s risk and reward. I pay my huge share of taxes too.
I have no control over the little people. I can’t control their work ethic and drive to earn money. I can’t control their crazy ideas to buy cars they can’t afford or housing. I have a pretty nice house now and I won’t lie but the vehicles are nothing special. Me and the wife share the hotrod luxury mini van, my daughter drives my Poopus (Prius) and my son has an old BMW, 2007. The newest car is 2014. My other daughter is 18 and will need a car too. I don’t have one at my awayjob either but would like one.
You are making more money now not working at 3k a month than your best working year at 26k. So why are you complaining about that? Find a side hustle, listen to Paula Pant’s Afford Anything to get help. If we’re living in America then we are lucky with many opportunities! This is a blessed nation. Open your eyes and rewire your thinking. Instead of blasting rich people, ask how you could do the same. I did. I’m a few years younger than you and also grew up without internet resources. My dad was a Sgt first class with 23 years and injured in Vietnam. He works with his injuries while looking for some disability I’ll add. I didn’t have a silver spoon and was closer to poor growing up. My parents did the best they could and I will do the same for my kids. Take the chip off your shoulders because there are always examples of people who have it worse than you. No offense, but I don’t think you would have climbed the hill I did to get where I am.
We are waiting on a reply Wacker
The problem with this idea is the false notion that starting your own business is the only way to survive in an American economy. Owning a business is fantastic, so long as your business is not overburdened by BS regulations and taxes, so much so that operating a business is choked financially. Even so, there’s also nothing wrong with manufacturing workers being satisfied with fair wages; LIVING wages. Unfortunately that is something of an American past-time. Apparently the communist mentality infecting our nation is work is considered a devalue, but yet highly valued by share holders, corporate managers, and CEO’s. If you are a worker, even with a Master’s Degree, then you are not entitled to the “good life”. This fits pretty close to Marxism where only business owners, Wall Street crooks, and lazy Zionists are entitled to a good life.
What about the people thst do work a ton and still dont get ahead
I’m sorry, but this article is utterly delusional and disingenuous. It almost seems like it was taken off a Wall Street Journal editorial by some right-wing corporatist hack (no offense).
First off, I would argue there’s a HUGE difference between the 1% (doctor) and the 0.1% (hedge fund manager). The doctor probably ends up paying between 30-40% effective tax rate because all of his/her income is earned (through labor). In addition, the doctor actually contributes to society. Whereas the hedge fund manager has long-term capital gains taxed at 15% or lower (like Mitt’s multi-million dollar Roth IRA). And what exactly do they do, aside from moving big numbers around from one account to another on a computer screen?
With the recent Panama Papers scandal, the obviousness of big companies and rich elites not paying their taxes was made clearly evident for all to see. Ironically, you can rightly argue the richest are NOT paying their fair share of taxes.
Second, in a society and government which provided the infrastructure, security, and means to become successful, it’s completely reasonable to expect the highest earners to contribute back to society in the form of higher taxes. Why should a company be able to undergo corporate inversions and restructuring in order to avoid paying US taxes, when the company, for all intents and purposes, was created and flourished in the US? Talk about unfair.
Speaking of paying taxes, what about the regressive tax structure we currently have in place that phases out social security tax after $100k or so (I don’t remember the exact number at the moment)? The poor and middle class are on the hook for this, and so much more. I would argue that until the bottom 50% have access to free health care, education, child care etc. that makes it possible for them to rise from poverty and become successful, they should be exempt from taxes.
From what I’ve learned and watched in my classes, the rich are highly unlikely to want to pay more for employees. In fact, in order to make more money, they’d try to hire fewer workers – give them a slightly higher wage – and make them work more.
So sure, they pay “more”, but in the end, other people end up losing jobs or making sacrifices.
I feel like this biased article is stating “equality” for the wrong group of people. Making “charities”? Like what? Many big corporation leaders spend a portion of their money lobbying for laws that would benefit THEIR companies, not for the people, so they can keep making more money. And at what cost? Killing the environment and the lower-income.
Excellent job pretending that FICA does not exist.
I’m in the top 10% of wage earners, yet I refuse to work more than 40 hours a week. I don’t have to. I focus on quality instead of quantity. I’m highly skilled and well educated. I work smarter, not harder. I’m doing my part and not twiddling my thumbs. I don’t expect to retire early and have no wish to. I’d be bored out of my skull. Incidentally, it helps tremendously to love what you do for a living.
On the other hand, in a married household with two young children and both adults working full-time jobs, it’s all about balancing work and home. I understand the belief that working more hours gets a hard worker the “keys to the kingdom” (whatever that is). But I’ve learned that’s a delusion, a myth. Too many people work like dogs their entire lives, and at the end of it have nothing to show for that hard work. If more money makes you happier, gives you better well-being, then great – go for it. But it’s not true for everyone, it’s not a guarantee, and it certainly wasn’t true for me. I’ve no desire to climb the corporate ladder or play the competition game or work myself to death in the (often vain) attempt to “retire early”. It’s exhausting and nowhere near as fulling as the time I spend with my family. That’s my choice. That’s my happy.
There’s too much emphasis here on money being the savior of all things, that money equals morality, and the implication that more money is never ENOUGH money. It’s a little disturbing. Thanking the rich for paying more? That’s disturbing. Have you ever tried to live on less than 30,000 a year? That’s tough. Less than $23,283 (the poverty line for a family of four)? That’s almost impossible. Yet you think they should contribute MORE in taxes? The people who pay more in taxes are the people who can AFFORD it – who can actually live and still prosper while paying more. The utter ignorance here is astounding.
My question to you is why is a couple having 2 children when they only make $23,283 per year combined in the first place? That is one person in this family of 4 making $11 an hour working 40 hours per week. I’m sorry you made poor life choices, but why should I be paying for it? This is not ignorance! I worked hard and from nothing to make it to the 1%. No handouts, no family money, just me wanting to be more. If I can do it, anyone can. Why should I pay more when other pay none? Roughly half of Americans even pay taxes. The bottom 90% of those half only pay roughly 30% of the taxes. So 5% of the entire population pays 70% of the taxes. ENOUGH!!
Your stats are deceptive. 45% pay no taxes because they have no taxable income or they get enough tax breaks to erase liability. The highest income homes pay a highly disproportionate amount in taxes because they make an extremely disproportionately high amount of money. This would hold true even if we had a simple flat tax.
There’s a bit more to it than “poor life choices”. No one chooses poverty. That’s a cliched falsehood that makes us feel better. Should our society, the wealthiest in the world, be so precarious that one catastrophe, one illness, or one stupid mistake, condemns a person or family to lifelong poverty? No. Yet our society does. It absolutely does. And once a family is sent into poverty, it is incredibly difficult to rise out of it – the statistics prove this.
I consider myself privileged enough to give the poor some empathy and help they desperately need. I don’t begrudge my contribution. Like you, I’ve worked hard. I’ve earned my way. I live well. I’m in the black. I pay my taxes. I don’t complain about paying more than others less fortunate than myself.
So Yes, you should pay for it. Because you can afford to. Because it’s the right thing to do.
Just in case someone else stumbles across this article, as I did, and questions whether poverty is, in fact, a choice: I think my experience is relevant. I started work at 17 and did everything “right”. I worked for a few years right out of high school, then put myself through the first two years of a college degree with the intention of transferring to a 4 year university. In that time, my husband and I used our tax returns to save up to buy our own home, which we accomplished. It was a struggle, but a bearable one. We had one child, but our lives were on track and we could afford to have her at the time. This was before the ACA existed, when a lot of lower income Americans didn’t have health insurance if their jobs didn’t offer it, and since neither of our jobs did, we had to go without. Then I found out I had cancer.
Luckily, I survived, but it had a devastating effect on our financial situation. Not only were we suddenly saddled with incredible medical expenses, but I was permanently disabled from the surgeries I underwent in the attempt to save my life, and we were left a single income family with a child we didn’t regret, but struggled to provide for. It can be very tough out there.
It doesn’t matter how hard you’ve worked if some tragedy comes along and sweeps the rug out from under you, and without some kind of social safety net, you’re just out of luck. To then have to listen to the blissful ignorance of people who believe that you just “made bad choices” is insult on top of injury. The great majority of the bottom 50% work just as hard if not harder, with far less to look forward to in terms of class mobility, than the middle class…we don’t want hand outs, but we should be able to work our 40 hours a week and live off of that without having to turn to the federal government to supplement our income off the backs of the average American taxpayer.
All this high and mighty “look at me I’m somebody” capitalism will be going out the window in a few years as efficiency approaches the point where we have business owners, and a few engineer and service jobs. Leaving 90% of the population at the point where they have to make the decision between killing the rich to eat or dying. A cruel heartless world can get pretty cruel when it has to. If there’s no help for the disadvantaged or down on their luck, they will survive using other means.
Problem…
We have SO many that don’t have the skills to do some of the jobs they are in, or just do as little work possible, and others who do the lion’s share of the work.
How do we figure out who gets paid what when some are simply lazy?
Who decides what medical care is “necessary”, what are “acceptable side effects ” & who is allowed to have what medical services in a socialist society?
Can Bernie Sanders or one of his followers tell us more details about his plan? Who decides what will be covered under this medical plan?
What other services will be afforded to young people with babies? Children? Older parents that may need some help in their homes?
What happens should rich people leave the country?
What will we do with huge homes? Cracker box homes?
How will people learn self-responsibility?
What do we do about abusive hierarchy in the workplace in infrastructure jobs?
Where will these new jobs come from without these people having a place to work?
What about underserved medical areas with not enough doctors in needed specialties?
What do we do with older Americans that can work, would like to work, yet can only work part-time?
How does he expect to get his plans through Congress?
What is to stop subsequent Presidents, governors, county & city council persons from getting power hungry and turning this country into another dictatorship – at the federal &/or state &/or local levels?
Who divides up land for people to live on? How will this be implemented in terms of housing?
What happens when people want to live in nicer, more temperate areas vs. Deserts and colder areas? Will this not stress the environment?
If the top 20% pay 84% of the federal tax that would leave only 16% of the federal tax paid by the remaining 80%.
Questions are, how much of the federal tax is consumed by the states to fund state and local programs? Does the bottom 80% actually pay a federal tax at all if the states are consuming 16% or more of federal taxes? More likely the states consume more than 16%. That would mean the bottom 80% do not fund federal programs at all. Do we, bottom 80%, believe we are entitled to something in which we don’t pay for? Or are we being greedy to live off the top 20% when they are paying to have our freedom protected? I find it insulting to have someone tell me I don’t pay or give enough to them when I already feed and protect them.
If you want to really know you are paying an actual federal tax then 2 things you need to do. 1) Are you in the top 20%? 2) How much do the states consume from federal taxes to pay for its own state and city programs?
Your article is purely statistical, you obviously didn’t grow up “poor”. There are lots of reasons why people in poverty stricken areas do not advance economically. For one the education they get is usually very poor. People often don’t get the information and guidance they need to be successful. When you’re poor, you’ll most likely go to a shitty public school (second rate education), live in a crime-stricken neighborhood, and you’ll have have very few opportunities to get involved with cool programs that require money. If you’re informed enough to know about and how to apply scholarships, you’ll apply for those, but it’ll already be an uphill battle for you because your education sucks and there are plenty of students from upper and middle class families applying for these scholarships too. Of course those students have a better education then you, and probably know more people who have been successful, so they’re better suited to win these scholarships. The list goes on and on. Income inequality is not a product of people not wanting to work hard. It’s a product of our society. I encourage you to visit a school in a poverty stricken area. See the culture, and how keeping crime out of some schools becomes a bigger focus than the education a lot of times.
Have a read of this post:
Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult
“If things were fair, the top 1% would only have to pay 20% of total income taxes since 20% is their share of total income. Alas, the rich pay almost double what they owe.”
I disagree and would say, as a tax professional, that this extremely deceptive for many reasons:
The federal income tax isn’t the only tax. Payroll taxes, property taxes, sales taxes, import taxes, gas taxes, cigarette taxes etc… Some Americans may not pay federal income tax but they still pay taxes.
We have graduated (progressive) tax rates for annual income because people need each marginal dollar less. The standard deduction + one personal exemption is $10,300; unsurprisingly, people need their 10,000th annual dollar earned far more than their 100,000th or millionth.
Everyone in the American economy is interdependent, but you wouldn’t know it looking at corporate salaries of the .1%. A full year’s work for my CEO is allegedly worth 400 years of work of the average accountant or analyst that actually creates a supports the product that brings in the money in the first place. It’s easy to get tunnel vision about how you personally work hard and earn your salary, and easy to forget the higher you’re promoted and the more you earn, the more you rely on the labor of other people to even have a job in the first place.
The other overlooked aspect of the economy is aggregate demand. For the economy to work, it isn’t just about doing skilled labor to earn a salary – it’s about spending money because aggregate demand is what actually creates our jobs. As you’ve pointed out, the bottom 90% save on average 4% of their income while the top 1% save 38%. The reality is that poor people are far better job creators than the rich because they actually put the money they make back into the economy. 0% interest rates, stock buybacks… we don’t have a shortage of saved money in the U.S. We need more spending by those who have the money and the moral obligation to do so, and if they won’t, you tax them.
We do tax folks who don’t spend all of their wealth through the Estate Tax of wealth over $5.4M per individual.
When you talk about CEOs making 400 years worth of work, that is the top 0.1%, not the top 1%. Don’t confuse the two, as so many people seem to do.
Check out: Income Profiles Of The Financially Free
Your whole arguments flawed, in my eyes, due to your understanding of what is ‘fair’. Paying 20% of taxes for taking 20% isn’t the way taxes do or should work. If that was the case we could privatise everything. The only reason they only take 20% is because they have enough money to support themselves. The reason one supports state intervention is because we realise that the system we grow up in inherently favours those born in richer areas and at birth no one is by any means given the same opportunities. regardless of how much you want to talk about rare bottom to the top success stories, the fact is that if you come from a poor area you are far far more likely to end up in a poor earning job than if your parents had the money to pay for a private education and bring you up in a wealthy area. Those are the kids that will end up in high paid jobs, and those that grew up in poor areas will, statistically, end up in a worse situation financially. You won’t suddenly see a year of students in an extremely poor area graduate and move on to become bankers and lawyers, just as you won’t suddenly see a year of privately educated students turn to crime and drug dealing to support themselves. These problems aren’t to do with work ethic and motivation, and if they are it’s a product of the environment that these children have grown up in. Was it anyone’s fault that they were born where they were born? Is it right for us to blame someone for having poor parents and just let them deal with that situation? That’s why we tax, because we recognise the unfairness of the situation – to at least try and put people on an even playing field, because currently that is not the way things are. The bigger the wealth divide the more we pull apart society. Poverty equals crime. Fact. Privileged people who don’t have to face that reality abhor the poor and the criminal with no thought as to the social causes for the situation. It creates a class war. That’s why I think when you say ‘fair’ I think your wrong. Example. if there are two people in front of you, one is a millionaire and the other struggles to pay rent and buy food. You are given 100,000 dollars to share between them, who would you give it to? Equality would have us split the amount evenly, but could we perhaps recognise that that amount of money means far more to the poor person? It means more in that it allows him the means to support himself to a decent standard. Food for him and his children, security of knowing his family will have somewhere to sleep or that he might put his children through college. THERE IS A DIFFERENCE BETWEEN EQUALITY AND EQUITY .
‘If everyone was a millionaire no one would be rich’. IF EVERYONE WERE A MILLIOAIRE WE WOULD HAVE ABOLISHED POVERTY! It’s appalling to me that someone could be comfortable spending millions on arbitrary material goods while there are people struggling to stay alive, and further for you to defend that right
You make it sound like if you just work more you will suddenly get wealthy. I have news for you it isn’t true. I was working three jobs, leaving the house at 7 a.m and not coming home until 11 p.m and was still only earning 24,000 per year. Granted some of that time was “wasted” on travel time between jobs, but I worked my tail off and got no where. While I watched the CEO’s of the company waltz in and work 40 hour work weeks and get millions of dollars, doing far less actual work than I was. I decided to go to grad school, which is where I am currently but it isn’t as simple as you make it sound.
I believe Sam is unmarried and do not have kids, so working 60+ hours a week doesn’t seem like much. I know people who have families who work that hard, but that really strains the relationships.
When my son was born, my work ethic changed. I spent less time at work, but tried to be more efficient. I also worked from home more frequently to offset the time I miss due to child rearing duties (my wife also works FT).
The bottom line is that you should work enough to enjoy the things you value.
P.S. I disagree that CEOs work 40 hrs/wk. Most of them work 10-12 hrs/day, and they are “on-call” 24 hours/day, 365 days/yr. However, even the worst ones will get a nice severance package/golden parachute when they screw up and get fired by the board. A CEO is the only job where gross incompetence can be rewarded.
This article is disingenuous. “Average” per capita income is an unreliable measure because it can be strongly skewed to the upside by people earning phenomenal incomes — which is exactly what happens in the case of the US. Median income is a much better indication of how people are faring. By the article’s own Income Tax figures, the median adjusted gross income was about $33K, a far cry from the $48K “average” income reported in the article.
The article also conveniently forgets that there’s a FICA tax as well that falls squarely on the shoulders of the bottom 80%. Adding in the 15% Social Security and Medicare taxes, or even just the portion of it paid by employers, makes a complete sham of the “Average Effective Tax Rate” column in Individual Income Tax Table presented above.
This article is misleading to the point of being dishonest.
I agree that everyone can earn the sum of money he needs or wants. But after reading a great book “The 80/20 Principle” I made sure that one shouldn’t work harder to earn more. Even more than 40 hours … as noted. The main question is “how productive and efficient is your work?”. So we must try to answer that question and improve our daily life in all areas, including finance by following the Pareto Principle. Because I always prefer simplicity and productivity.
Legally, i don’t pay tax too and my earnings qualify me as the top 1% according to the article above. How Is that possible?
Step one – give up your American citizenship and take up citizenship in countries where there is no capital gain tax. There are really nice places to live where capital gain tax is zero. Google and you’ll find.
Then set up a limited liability company to expense away all your taxable income. Engage in as many businesses or professions that generate wealth thru capital gain as you can. There are many different options to suit a wide variety of interests. You just need to do some homework
That’s it. You can be top 1% earner and legally not pay a single cent of income tax.
It’s interesting how your perspective begins to change once you realize how much opportunity is out there. When I was getting through college I always considered a six figure salary as true wealth. The pinnacle of success. Once you start to grind through your career you begin to realize how many income opportunities there are. It just takes determination and diligence to realize your earning potential.
OHHH, just “$43 dollars a month”…???!!! I’d be homeless if I had to spend that much more on taxes! I’ve worked my ass off all my life and I am struggling to survive living in San Francisco. Actually, I only WORK in SF. In reality I have to live in Oakland because you assholes have made it IMPOSSIBLE for me to live within an hour of my place of work. Assuming that I can afford anything more than my already month-to-month livelihood is moronic! This is coming from a graduate of a masters program at one of your private institutions you speak of. Sorry my daddy didn’t know any of you techies for me to earn a living wage out here….
Wait, so I’m an asshole because you can’t live in San Francisco? How does that work? I’ve paid over $100,000 in income taxes a YEAR that gets redistributed by the government to help society. I donate to my local SF library and volunteer for local community events. How much do you pay in taxes and what do you do?
I just spent 6 months putting together The Best of Financial Samurai eBook to help empower people to lead better financial lives. If you buy it, all proceeds after expenses gets donated to a charity that help keep Oakland youths off the streets and in the classroom. It’s called Alive & Free. As an Oakland resident, maybe you’d like to pitch in instead of blame others for your problems?
Here are some other posts you’ll like:
A Massive Generational Wealth Transfer Is Why Everybody Will Be OK – But, I’m thinking maybe not you?
Stocks or Real Estate: It Depends On How LUCKY You Are – Are you someone who attributes other people’s success to luck and your success to hard work? If so, you’ll love this post!
I am not sure that he is meaning strictly you but more aimed at the people who make comments similar to yours about how people just need to work more and move to higher income areas without taking into account that it isn’t that simple. You may or may not have thought about the difficulty in doing such a thing even though it is good advice if someone can afford it. A large majority of jobs in places that don’t have unions do not allow overtime forcing you to come in late or take long lunches to prevent you from getting it and even writing you up should you accrue more than an hour of it. This limits peoples possibilities to getting a second job which since most companies prevent you from working a second job in the same field can make things difficult. Combine that with the fact that most of these types of people are living paycheck to paycheck and unable to save up the money necessary for a move to a higher income area and working those area may actually cost them more in transportation expenses then what they are earning extra. This is part of the backlash that so many people with money receive because of comments that would be sound advice for someone not struggling just to get by. You hear it time and time again, work harder, work more, move to a better place, I did it why can’t you, just go to college. The worst part is that if you compare payment between jobs a couple decades ago to jobs now the low income jobs, adjusted for inflation, pay roughly the same to within a dime or two while as you advance up the pay increases between the times steadily increase.
I hear you. There is no easy solution, and everybody has a different set of circumstances to deal with.
The one thing we can control is our effort. Never fail due to a lack of effort. Fail due to bad luck or circumstance, but go down fighting until the very end. Work on a side hustle, an X Factor from 4am-7am before work, and then from 8pm – midnight after work. Don’t stop trying.
Life is reasonably comfortable in America (I’m in Cambodia now where I just witnessed 4 year old kids walk miles to school in 98 degree heat after I asked the driver where they were going). The worst is REGRET for having never tried, and having never tried hard enough.
FS,
I could not agree with you more. If you want it bad enough make a plan. Read more, find a mentor, work harder, side gig, find something that is scalable and GO FOR IT!!!
The only limitations we have is in our mind.
“The only limitations we have is in our mind.”
If you lived in a fishbowl maybe
https://www.forbes.com/sites/janetnovack/2011/04/08/how-to-take-a-tax-write-off-for-a-new-porsche-bmw-or-cadillac/
Write off your new porsche or other luxury car as a business expense ;)
Or, your Range Rover or any luxury SUV!
Ppl on here are so crazy frustrating it’s insane. How can people be so blind. 84% of taxes are paid by the top 20%, which starts around 70,000$ a year. Someone making 389,000/yr should not be taxed at same rate of someone making 20 mill/yr no matter how the income is made. Corporate tax is a joke, not one investor on earth in anything says “let me pay my fair share.” I just don’t understand what people can do with the second billion that they couldn’t do with the first. If everyone is trying to pay as little as possible, and one group of people have unlimited resources to help them, who’s really paying the greatest portion? The richest of the rich are getting richer and richer and are so out of touch due to greed and power that someday our kid’s kids will experience their own ‘French Revolution’ if taxes aren’t reformed.
Amen.
US consists of 2 category of retirees. Ones protected by pension, and ones who are not. The web is full of articles on how 401K is same as pension, when it is NOT. It is high time individuals are given more choices to save, with no pension to rely on, in most of corporate world.
– A request from hard working middle income group, who can never be on Govt subsidies.
This article is somehow misleading. The important point of misunderstanding is that “Income Split Point” is the dividing line of each income layers, and it does not mean average income of the layers. This article does not show the definition of this terminology and relates it to the average income of each layer. My understanding is that it is the bottom line of each layer, from which the next layer begins.
The average compensation for top 1% in 2011 was $10.5 million, a lot bigger than the split point of $380 thousand something. They are compensated with stock options and other bonuses as well.
Check this article in Forbes.
https://www.forbes.com/sites/scottdecarlo/2012/04/04/americas-highest-paid-ceos/
Tax burden share can have implications, but it is also misleading. Some 15% in America is now living under the poverty line. By the very definition of poverty line, it means the subsistence income that enables poor people merely keep their subsistence.
Should such people pay income tax as well? They may not pay income tax, but they pay the same indirect tax when they buy a Big Mac.
Regards!
I correct the mistake in my previous comment. The compensation of $10.5 million in 2011 in Forbes article was for the chief executives of top 500 companies, and so it does not mean the compensation for top 1%. I don’t know why I was confused at the time. I intended to indicate the misleading concept of the “Income Split Point”, which does not mean the average but the border line of each income layer. Thanks.
According to that chart the average AGI of the 1% after taxes is $924,000. It is $14,956 for the bottom 50%. That is AGI. The wealthy have many tools to work the A part so the I part looks lower than it is. Setting that aside, compare $924,000 per year to $15,000 per year. Who can afford to pay more in taxes from this calculation? Can the poor folks struggling to get by on 924k a year, get by on say 800k a year? Ask the $15k/year folks.
Another perspective, it will take the 15k folks over 61 years to make the amount the 924k folks make in one year. A long lifetime of working to make what the 1% make in one year. Do the 924K folks compress the equivalent of a long lifetime of work of the 15k folks into their work year. can they flip 61 times more burgers in a year than the guy that’s been stuck doing that for 20 years? I know many white collar professionals work very hard. They also surround themselves in luxury while they do it. The the doctor entrepreneur do his 80 hours a week as a construction site laborer with a side of fast food slinging and another of pick up yard work, for a bottom 50% income. See which he finds harder to do.
The fact is, our system REQUIRES a large % of poor people; it generates them. Wealth is made from actual work. But in our system, being wealthy means you get income and more wealth simply by having enough wealth to “invest”. You don’t earn that. That wealth is created by the lower income workers who do actual work. But it goes to those wealthy enough to “invest”. It is utterly absurd to suggest, in our system, the way work is currently valued, that everyone CAN get ahead. Everyone can’t. Only a few can. If everyone in the US had a high IQ and a PhD, there would still have to be hotel maids, burger flippers, slaughterhouse workers, farm workers, factory workers, baristas and on and on. They CAN’T be well off in our system. Stop pretending that they can if they just work harder or smarter.
What needs to happen, more than tax reform is a radical reform in understanding and appreciating the value of work. Menial labor is required for our society to function. It is required for the wealthy to be wealthy. What would be “FAIR” is the recognition of the true value of all types of work that make our society function, and the rewards of that work be more fairly distributed. When that happens, sure, let’s talk universal flat tax. Until then, you are a horses ass to suggest it.
What a great post. If everyone worked harder and get more skills, then by definition, they cannot enter the 10% or 1%, but still be at the 50% level or below.
Every agrees that the top earners pay more (in absolute and relative terms) than those who are poor. But flat taxes don’t make sense in a logarithmic world. If I made $100k, and $15k goes to my flat tax, the remaining $75k is enough to have a good middle-class lifestyle. If I made $25k, then about $3800 goes to taxes. Since I’m much closer to the margin, this $3800 means much more to me than the $15k to the $100k earner, and especially to the $1million earner who pays $150k.
A progressive tax system is a fair tax system. We must strive to continually improve and simplify it. But as a tax philosophy, it is much more fair than a flat tax.
On the spending side, all the rage is on small items like scientific research, government salaries, arts funding, etc. If you’re serious about balancing budget and reducing spending, you only need to look at Social Security, Medicaid/Medicare, and Defense. These items make up about 75% of our budget. Serious cuts or reforms in these items will need to be made, but in our political climate, would be impossible.
I’d like your opinion and others input on this question:
I need to park $400k for approx 1-2 years. At which time I would then use it to purchase a house.. however for that 1-2 years, i’d like it to be working for me, but don’t want to lose it either.. I was considering putting it into PPF and/or PGF.. looking at the history of those ETF, they both seem relatively stable when the market fluctuates and they pay a nice dividend.. so it “appears” to me they are somewhat stable and safe investment.
I’m close to retirement and have other funds invested already, and I just sold my property and will rent until i figure out where I want to live and retire..
Thoughts and Opinions?
Appreciate any feedback you and your readers may have.
1-2 years is an insufficient time horizon for any equity investment to guarantee you a return. Buy a t-bill or park it in a high yield savings account. The return sucks but if you can’t afford to have under 400k in 1-2 years when you need that money than you can’t afford to take the volatility risk.
YES, Work harder at your minimum wage job, better yet work two minimum wage jobs, 80 hours a week, $7.25 * 80*52, and you, slacker that you are, still will top out at 30k. Don’t tell me that the big wage earners have opportunities that you don’t have, and you know how they slave away at those ego-suffocating jobs. You low wage earners just need to uproot your family and move to a city with high tech jobs…not that you have the skills or education to get any of those jobs….then there’s that spendthrift government, providing benefits to veterans and healthcare to all Americans, monitoring our security, food, water, and air..
A condescending article that ignores the realities of life for many in the US ….
At 389K a year, you still expect sympathy?
Nobody expect sympathy for those making $389,000+. But people making $389,000 certainly don’t deserve to get attacked and vilified. I’d rather say thank you for paying so much in taxes that gets redistributed to others who have less.
It’s OK to try and raise taxes on others if you don’t have to pay more yourselves. But as someone who has experienced racial discrimination before growing up in the south as a minority, I can unequivocally tell you that discrimination is NOT OK just because you aren’t being discriminated against.
How about getting the skills and education to get those jobs? The internet and knowledge is essentially free now.
Nobody needs to thank anyone for paying taxes: we all know the rules going in (or can look them up), and none us set our own salaries or our own tax rates (unless you’re a politician). It’s the nature of the beast, it’s the law, and it’s part of being a citizen in our great country.
To feel entitled to a ‘thank you’ when you willingly work here, knowing full well what you’ll be taxed, is pretty obnoxious. That’s like people taking out 100+K for an out-of-state B.A., then complaining and wanting the debt forgiven. It might be even more obnoxious, since (if you’re making 400K) your life is probably much better than the ignorant indebted student’s. I’m sure that student would gladly take your job and salary off your hands and pay your taxes for you.
I think saying “thank you” is a cheap and easy way to show appreciation. So, I say “thank you” to as many people as possible.
A little acknowledgement goes a long way, and I’m supremely appreciative of those who support those who have less.
The income is important but not the most important. The purchasing power shows the real thing.
Someone can make $380,000/year and can still be poor. If fundamental needs like food, housing, school, transportation, costs are hundred of thousands/year, no matter how much you make, $3-400,000/year.
There are out there people in other countries that they make only under $10,000/year and still have a better life than many of us here in US.
So I would say that a system is fair, if everyone who works at least 40hours/week, gets a pay check enough to pay for good food, housing expenses(mortgage,rent, utilities), school,entertainment,transportation,hygiene,etc and have a little left for saving.
I do not believe that a union electrician makes $150,000/year. Maybe in a speculative industry.
Most of the engineers in US with a BS or MS degrees do not make that money.
I agree with young focusing on net worth over income.
Have a read of my latest post: https://www.financialsamurai.com/focus-on-building-net-worth-more-than-growing-income/
That is just crazy speak Johnny! Those are extraneous examples. You’re asking us to believe that someone making close to $400K a year is poor? And your definition of “fair” is essentially saying the government should somehow ensure (through law or handouts) that virtually every need and then some is met, regardless of what occupation is chosen.
There is one other group that pays no federal income tax: people who live off investment income, independent of age
In addition to the standard deduction and personal exemption that allows low-income families to pay no tax (about $20k tax free for married filing jointly), if income comes from dividends and long term capital gains a family can earn another ~$70k a year tax free ($90k+ total)
This post explains it fairly well:
It seems Uncle Sam really wants people to retire early and live off investments
We also shared our actual 2013 tax return, which can make it easier to see how the theory is applied in practice ($91,752 in AGI, $0 tax)
If Congress is interested, I have a long list of recommendations to improve the tax system
You really should read the article carefully for one, it contradicts itself. And capital gains once realized are taxed, plain and simple (yes, at a lower rate “generally” than your marginal income tax rate, but not always). And if you think you’re going to NOT pay taxes by some maneuvering of investments into qualified dividends, etc., you need to look more closely. And moreover, the “tax free” investments generally have lower returns than taxed investments for the obvious reasons. What maters is your free cash return. There is no free lunch, or should I say it’s pretty difficult to find.
Yeah? What is the contradiction?
I’ve followed the recommendations in that post for the last 2 years and paid $0 in tax on AGI over $90k, while invested in the US stock market and matching returns of the S&P500.
It seems like the lunch is free (and tax free too.) Turbo Tax agrees
Realize the gains as cash, you will pay tax, it’s pretty simple. As long as you do what most people do, even those who don’t read the article, and postpone the gain, you’re fine.
Capital gains are taxable events, true. Yet when total income is such that the marginal rate is less than 25%, then the rate applied to long term capital gains is 0%.
Certainly, following the path that most people do would result in no taxes today, but eventually those gains will be taxed. Postponed as you say. By harvesting the gains along the way, the net tax is zero, both today and in the future
This is the result of the so-called Bush Tax Cuts and their addition to the permanent tax code as part of the American Tax Payer Relief Act of 2012
The lunch is definitely free. Here is a concrete example:
$44k in capital gain. $28k in dividends. $91k total AGI. $0 tax
In my opinion, the only “Fair” tax system is one that is based on consumption, as opposed to income. This would eliminate the need for self reporting, and the majority of the IRS, as we already have a sales tax system established within every state. Therefore, the implementation of a “Federal Sales Tax” would be very simply integrated within the existing systems that are already in place today. This would allow for revenue to be generated from all who consume products within our county. Visitor, criminals, illegal aliens, businesses, individuals, you name it, they are all included as they all consume goods when within the United States. This would stop punishing income earners for earning and saving, while requiring everyone to participate in the tax program.
Some may comment that we will then be punishing the poorest of the country because everyone must eat and it would be “unfair” to tax someone for buying food. In response to this I would suggest that we eliminate food staples from the “taxable” consumables, although in many states we are taxing food today. Sales Tax Free products would include necessary “staples” such as meat, eggs, milk, cereals, water, etc. but not unnecessary consumables or simply desired treats, such as soft drinks, coffees, candies, etc.
Additionally, a higher rate could be charged for luxury items or so called “sin” products such as luxury automobiles and boats, or alcohol and tobacco…
I would be interested in hearing others thought from this perspective.
First and foremost, before we even think about fixing the tax system, we need to fix the SPENDING system. It we stop wasting money on STUPID thing, there would be plenty. Then, it’s a lot easier to fix the tax system when you get to let EVERYONE keep more of what they earn.
It’s time to REQUIRE a real balanced budget. You enforce it by not allowing ANY government hiring, ANY pay increases for government employees (including step and seniority increases), NO new government programs or renewal of expiring ones, and Congress and the President (and their staffs) get a pay CUT of the same percentage that spending exceeds revenue.
Exactly Jon Gif, it’s simple common sense! And is an ethical methodology as apposed to the system of appealing to special interest groups we have today.
It’s an interesting concept, but increasing prices and not taxing income has the potential to incentivize an economic stall. A system rewarding you for NOT spending is probably not the best way to foster our economy!
It also hinders governments ability to coerce industries to invest in new technology (granted the free market should solve this on its own, but its governments job to act as the voice of the people and reward champions of issues like green energy and healthy/sanitary food technologies). Your concept might actually create the ‘cheaper is better’ mindset where price becomes the dictating factor in consumer purchasing–which is debilitating to otherwise healthy competition.
Just my initial reaction to the concept.
Wow, that’s scary Rob. Perhaps learn a little more about how a market works. And by the way, if “green energy” were such a great thing it would (or will) stand on it’s own. And if it takes interest in it to create demand, go out and create that interest. Stop asking government to execute the will of a small minority (who think they know best when it comes to energy) over the desires of the majority. If you like green, fine, go buy it.
That the market will proactively solve our problems via supply and demand is a fantasy. There is a huge demand for the cure of cancer. Why doesnt the cure just get up and stand on it’s own two feet? Certainly there is a demand, no?
Your example of cancer confuses me. Has the billions of dollars funneled into cancer research by the US government turned up a cure? Can I use that fact to say that the government solving problems is a myth?
The free market wanted a better way to transport goods from China to the US. It created super freighters. The free market wanted a better way to use American cotton and the cotton gin came about. It wanted a cheaper way (compared to kerosene) to light up our homes and the electric light bulb was funded.
Time and again a demand for something has created funding for it. Both public and private. With enough funding and time, humanity has again and again solved it’s problems.
Here’s a question. Can you find me an example of something having a huge demand and getting no private sector funding?
Once upon a time, there was market that could product agricultural goods at a very efficient and profitable rate, created wealth for many, and established a robust international trade network. It was called slavery!
A tired point is that somehow the “market” has the solution to solve every problems, and the government is the killjoy that restricts “freedom.”
I’ll thank the government for mandating car companies to put in seatbelts, food and drug testing, pollution laws that keep my rivers and air clean. Do they always maintain a fair balance, off course not, but neither does the market.
You only need to look at China to see what a largely unregulated market looks like. You get your 10% annual growth, but you also don’t see the sky in cities like Shanghai and Beijing. Me, I’d rather see the sky.
You are an idiot. Use tax has been proven time and time again to be regressive. The poor spend most of their income on food, shelter, clothing, necessities. There is little savings, less home ownership.
The article starts off by talking about Averages which is very deceptive. It should be using the Median. The average income of 9 people who make a dollar and 1 person making a million is $100,000. The median income of those 10 people is 1.
Richard Saunders: The article looks at average rates by many income brackets, so the implications are much more telling than a simple median. It’s a very sound article and well founded. I’ve read quite a bit on the subject.
Do you mind if I quote a couple of your articles as long as I provide credit
and sources back to your website? My blog site is in the exact same area of interest as yours and my users would
definitely benefit from some of the information you present here.
Please let me know if this alright with you. Many thanks!
Tom: the tired talk show theme is exactly what you are trying to get people to believe.
The fact that it is a meme, continually broadcasted by so many doesn’t make it true. Go check the CBO website for what you are looking for (combined taxes), it’s out there. All Fed, State and local incomes taxes are progressive or at a minimum flat. Sales and transactional taxes are what they are, those with greater income spend more or have assets that are taxed more. So even at an “equivalent rate” they are higher (and of course, in absolute dollars, higher income earners pay much, much, more). Moreover, the lower income brackets not only pay fewer taxes (if at all on a net basis) but often receive direct dollar benefits (e.g., earned income tax credits) and a whole host of non-cash benefits those paying substantial taxes are not “entitled” to.
Yours is a very old and unjustified argument.
This is a tired talk show theme. Take a look at effective tax rates for all taxes combined, including state, local, sales etc. And you will find that most poor and middle class are paying a higher rate than the wealthy.
Also note that this country has some of the highest measures of income and capital inequality of any wealthy country in the world and you’ll realize the poor aren’t doing so well and the rich are getting by just fine. I don’t think we need to increase taxes on the poor at this point.
Tom: the tired talk show theme is exactly what you are trying to get people to believe.
The fact that it is a meme, continually broadcasted by so many doesn’t make it true. Go check the CBO website for what you are looking for (combined taxes), it’s out there. All Fed, State and local incomes taxes are progressive or at a minimum flat. Sales and transactional taxes are what they are, those with greater income spend more or have assets that are taxed more. So even at an “equivalent rate” they are higher (and of course, in absolute dollars, higher income earners pay much, much, more). Moreover, the lower income brackets not only pay fewer taxes (if at all on a net basis) but often receive direct dollar benefits (e.g., earned income tax credits) and a whole host of non-cash benefits those paying substantial taxes are not “entitled” to.
Yours is a very old and unjustified argument.
Sow me where in the tax code the tax rate goes down.
Not a fact in your post.
I worked for the IRS in data entry for awhile and I can personally attest that the wealthy are often paying less taxes. I hand entered and coded paper tax returns and was shocked how a family of 4 making 20-30k would frequently be paying less than someone making well over 100k. I can’t say how it happened because I was younger and didn’t really understand tax codes, but I was the one typing in the numbers and the “amount paid” by many, many wealthy taxpayers was frequently less than the poorer families. I remember distinctly my shock and outrage after I saw the pattern emerge.
“I hand entered and coded paper tax returns and was shocked how a family of 4 making 20-30k would frequently be paying less than someone making well over 100k.”
This is right, unless you think someone making over 100k should pay less? Why are you shocked?
When you said rich paying less, I would assume you are saying in terms of effective tax rate, not the whole amount. The fact is the top 5% earners are contribution over 80% of tax revenue for the govt.
In reading her post, Deniece mentions she entered the “amount paid”, presumably accompanying the return she hand-entered. So it is not surprising that in some cases an earner with less AGI paid more than a higher earner simply because they did not withhold appropriately. The higher earner may have a tax consultant so they can maintain proper withholding, especially considering the higher dollar penalties they may pay vis-à-vis the lower income earner. After all, we are debating with a data entry clerk at the IRS.
Deniece: all you have to do is go to the IRS website, there you can see the “effective” or average tax rate and amounts (actual dollars) filers pay for various income brackets. BOTH the effective rates and dollars paid GO UP with increasing income bracket. Of course, there are unique cases where you can compare individual filers and this is will not hold true, partly because our tax system is so complex. But on average (which is what we are talking about) higher income equals a higher bracket AND greater tax paid.
I’m tired of hearing the ways to produce more revenue for the government when there’s so much waste reported and inappropriate funding in the 100s of billions along with IRS workers who owe billions in back taxes. It’s preposterous the effort in trying to raise any taxes before the waste is handled through a combination of law changes, policy, sending civil servants and bankers to prison for crimes that undermine our economy.
All that money would probably add up to 500 billion at least, start there!
Again Tom, I have my suspicion that Eric’s post is not entirely accurate.
Aside from that, the data FS provides is the data, from the IRS, it’s elsewhere in many places and easy to validate if readers care too. E.g. the top 1% paid on average $280,000 in Federal income taxes while the bottom 50% paid about 400 bucks. It’s all there.
So if Eric is somehow suggesting that there is some kind of grand conspiracy out there wherein the wealthiest in our society are somehow escaping taxes (in significant numbers) and as such do not show up in the data… well, I wish someone would provide a little more proof (as apposed to some anecdotal example). I guess that’s the case with conspiracies, there’s little or no proof.
A good exercise for everyone is to hang-out somewhere that successful people gather, say some bar in a very nice restaurant in a wealthy neighborhood. Then just politely ask people about themselves and how they became successful, they will be flattered. Then find a watering hole where you know people are not very “economically well off” (be careful of course). Ask the same questions, but do it ever so subtly as to not offend. Then just compare the answers.
All of this is no mystery.
Good tip. If more folks can be willing to open up their minds and look to see how wealthier people got to where they are, instead of just shoot them down for being lucky or whatever, I think more people will get wealthier!
Get a mentor, listen, ask people who’ve been there, done that.
FS, thanks again for a well balanced and objective website on a subject (money and wealth) that can be so contentious.
And much of the mystery, hysteria and misinformation about wealth creation is due to this false egalitarian ethic that permeates every aspect of our society today. Yes, everyone is entitled to equal opportunity, but that NEVER produces equal results and never will – simply because individual people are in fact different from one another and that leads to different outcomes (e.g., beliefs, ambition, willingness to take risk, preferences for certain life endeavors, culture, cognitive ability and so on).
All too often people make certain life decisions, take certain paths in life, engage in certain behavior, don’t recognize they lack requisite traits, abilities, etc. all which ends up hindering their “success” or at least as they perceive it. They then blame “the system” or the successful or any number of externalities other than themselves. The reasoning goes: “if everybody is equal then anyone who has more must have obtained it at the expense of someone else or it is otherwise ill-gotten.”
I agree, I here hear people say all the time the rich pay less in taxes, they use Warren Buffet as their example.
I ask them to point me to the location in the tax code that the rate decreases. It does not. It never decreases. Then they state well he makes all his money on investment, and capital gains is lower, well yes, but its even with capital gains the rich pay more on capital gains.
The fact is the press has done a great job of saying the rich are bad, corporations are bad. Maybe people should be upset with how the government spends the money they takes from people.
Specifically, people who have a lot of investment income, long-term, reap huge benefits by only having to pay 28% Capital Gain Tax Rate, rather than the normal 35%+ rate.
Also huge corporations can move to Ireland or other off-shore locations to enjoy tax benefits while still operating mostly in the US.
Jacob, simply check the IRS data, it belies what you say. In terms of income groups, each successive group tax payers with greater income pays a greater % of their income (regardless of source) in taxes (Top 1% > Top 5% > Top 10%, etc. in terms of income earning groups).
And you are confusing marginal rates with average rates, you are comparing the top marginal income tax rate with a capital gains rate. It is more than likely for most their average tax rate is lower than the 28% you specify, that’s all that matters, really. That’s in the IRS data too.
Moreover, stockholders own and are responsible for the company in all regards; the income, the cost, the profit AND for the taxes. The corporation also pays taxes on the stockholders behalf, so the combined tax on corporate “profit” or “returns to capital” is very large in this country.
And as much as you would like to believe companies run from America to incorporate, the number is quite small by comparison.
Lastly, even if your argument were true, common sense suggests that even the % difference you sight is so small that it in no way explains the differences in after-tax income.
The top capital gain rate is around 23 percent. The capital gain rate for people in the 15 percent bracket is zero. A married couple who is living off investments can therefore take home around $75k and pay no taxes. A non married couple with head of household closer to 90 k if both have their own portfolios. If the married couple have itemized deductions and exemptions they could potentially take home close to 90k to 100k before paying any taxes. If this couple were running a business they could deduct their BMW lease payments, health care costs, and other benefits to help this couple have a break even business. Furthermore this small business can offer a 401k plan and Hsa plan to put away another 22k away tax free. This couple would be in the top 8 percent and pay no income tax. Super wealthy people won’t pay zero income tax, but those who rely on the capital gains rate will pay a lower effective tax than many middle class families. Furthermore wealthy investors pay zero dollars on the appreciation of their assets which is arguably income in a real sense. I hope this helps with the zero tax part…
Exactly!
After working our tails off for 20+ years my wife and I entered the top 1% in our early 40’s and recently at age 49 entered the the top 0.1%. You would never know by looking at us that we have an eight figure net worth. We have no boats, motorcycles, or fancy cars. My car doesn’t even have power seats. We know many other 1%er’s and I can attest that they all pay big taxes. We pay about 43% of our gross income every year in state and federal taxes. Add sales tax, FICA, medicare, and property taxes on top of that and about 50% of our income goes towards taxes. The real problem will be when wealthy couples like us step out of the work force a decade or more before normal retirement age because we are tired of working for the government 5-6 months out of the year. Serious tax reform is needed if this country is to survive another 200 years. I don’t mind paying my “fair share” but the top marginal of 51.4% that we currently pay on much of our income is too high. It is one of the major reasons for our decision to retire in the next couple years.
I retired early partly due to high taxes as well.
I’ve found that making $200,000-$250,000 a year is the ideal income for maximum happiness. Income is enough to do whatever you want, and you aren’t taxed to the point where you feel taken advantage of.
Please excuse me if I don’t feel a bit sorry for you or your 8 figure income. How much money does one actually NEED?
There is a HUGE difference between an 8 figure NET WORTH (which is what was stated) and an 8 figure INCOME to which you alluded.
The answer to that question is unique to each person. In a free market system how can anyone define the “NEED” for someone else regarding finances / income. The tone of your comments has the odor of socialism, and that, my friend, is not a good path to financial freedom.
What do you do with your money? Your take home is over 500k a year and you have no big material items. You either make lousy investments or like to sit on money and whine about paying taxes. I am in the same situation and don’t spend like crazy yet enjoy life. Paying taxes over 50% is fine and def prefer to keep working and paying vs no longer bringing in 500k a year.
We are retired now. We have 3 beautiful homes that we enjoy and we travel extensively. I splurged on a couple boats in the last year and we spend much of our time on the water when we are not traveling.
Unless your business lost a boatload of money earlier and you have tons of deferred tax credits that are somehow still operational I can’t see you being taxed 0 all the time.
However, with “loopholes” and clever tricks to transfer wealth like real estate appreciation, life insurance, or maybe out right entering a legal grey/black area that got banks like CS in trouble you can definitely minimize your tax bill to far below the maximum 40% bracket for top earners. Its a bit harder to get below the 15% capital gains but I’ve read you can do stuff like wait till you die to pass appreciated stock to your heirs so its gets a markup without being taxed. Since I’m not in any way a financial advisor or estate planner I’m sure there’s plenty of other small things you can do that add up.
For most Americans, these things are just not worth it as you’d have to actually hire a good financial advisor/ estate planner (most of whom charge sizable fees and make 6 figures + anually). But if I ever get rich enough and haven’t succeeded in lobbying the UN to impose a 75%+ wealth tax on the world and rigorously prosecute capital flight for tax avoidance purposes, I’m definitely taking advantage of as many of these loopholes as I can.
It’s interesting you say that Tom, because I’m currently consulting with Personal Capital, a digital wealth manager who employee Registered Investment Advisors to help with estate planning, investing, and so forth. Their highest fee is 0.95% on assets over $100,000 a year, and goes down from there.
If someone holds stock till death and extremely wealthy the fair market value of the stock is included in the estate of the deceased. Yes the family will get a step-up in the value of the stock, but could be taxed in the estate if over the gift/estate tax exemption amount. Estate tax is 40% currently, so yeah there’s that…
Good estate planning will contribute that to a family partnership or another entity and gift the partnership interest at a discounted rate prior to estate issues arising.
stock for someone “extremely wealthy” would likely be moved into an irrevocable trust along with any other assets subject to estate tax (i.e. real estate/personal property, etc.) during their estate planning.
You BETCHA! And kudos to YOU, Sir, for being honest. I can NEVER get angry at someone who USES the system the WAY it was intended. But, until the electorate is given HONEST numbers, we can NEVER realize just how much (or how LITTLE) money is actually being paid by the top 1….or even 2%. I want to see HOUSEHOLD INCOME become the measuring stick. How much did you TAKE IN this year? From ALL sources. And how much did you receive in refunds? The remainder is how much you actually paid. That, my friend, is the only honest picture, from which we can judge, whether people are paying their fair share of TAXES. In the END, the ONLY fair tax system is one where the household income is computed with the SAME percentage for everyone. No deductions. What a DREAM (one that will never become reality).
That kind of thinking is what is saving the rich! We have GOT to stop thinking they need to pay such ridiculous rates. Many pay very little actual cash. The thing that has to happen is the rate structure has got to change. That is the only way to insure everyone pays SOMETHING. If every taxable entity paid, say, 7-8%, with NO deductions, the government would have more money than they could spend! Flat tax rate, no deductions. If you WANT to spend your money, because you have more of it, it will help the overall economy. But no more, where people with billions, get to keep all of it because they spend it correctly. That’s bullshit.
And your 7-8% would on average be a tax break to the 1% and would be a tax increase to over 50% of people who file tax returns. Just check the IRS website before making unfounded remarks about how much people actually pay in taxes. And it is all based income, not sure what the remark above is about “household income” is. That is effectively what the tax is based on (e.g., married filing jointly).
Hi Sam,
My thoughts is that if a person who is 80 years old and has $1 million dollars compared to someone who is 30 years old and has $1 million dollars has different worth. Someone who is 30 and has that much money has the most important asset in the world, TIME, to build on that wealth.
An old wisdom insight is that most 80 year old people would trade their $1 million to be 30 years old again.
Blair
Professorsavings.com
Beware, beware jumping to political conclusions about the relative tax contributions of money classes in the US to the society at large. First off, I offer me as an example of just how misleading things can be:
I am probably in the peak years of my income generation, but I funnel it through a business. Between work and investment appreciation my net worth increases about $30k/month. My total federal+state+local income taxes are zero. They have been for years, and will continue to be zero for years. Moreover, inheritance tax planning will likely hide my assets for two more generations. In 70 years my grandchildren will pay a hefty income tax that will buff the charts like the one in this article, but the years of untaxed compounding will be hidden. Shall we use 10x appreciation ?
Don’t kid yourselves, folks. Well off people hide massive amounts of money from the AGI.
Care to share how you pay zero taxes?
It’s because of his ‘business expense’ when he file for tax return. It’s a loophole that all the rich exploited because the tax regulations are create by the rich. :)
Bull.
Show me how your business makes money and does not pay taxes. What type of legal entity is it?
How do you calculate your net worth?
Why the feigned surprise? Companies like General Electric often pay little or no taxes.
That’s an idiotic statement Jay, have you bothered to ever check one of their Annual Reports? Or are you going to say the report is a lie? You would also know that lying in them is a Federal crime. Of course, there is no punishment when the Huffington Post does it though.
Fermi, whoever THAT is, is obviously aghast at the idea he has been TAKEN by what he THOUGHT was a fair system. I always figured the system was NOT what it’s presented to be, but when I was informed that this guy was gonna pay way less than I was paying (his income HAD to be enough to pay a mortgage on a home worth 7 figures, and a car that cost him 6 figures, new), because his TAXABLE INCOME was way less than mine, I realized I was right all these years.
LOL! If you own a business, there are a myriad of ways to “hide” income, legally. Can you explain how a man, a podiatrist, with three offices in California, could POSSIBLY make enough money to afford a home in a gated community and a 4 year old Mercedes, when his “taxable income” was less than myself, who worked for an auto company and was an hourly employee? America (those who are in the middle 20%) needs to wake up. Things are NOT FAIR. We need to abandon our idea of a “progressive” tax system, and adopt a FLAT TAX, with NO deductions and tax everyone on their HOUSEHOLD INCOME!
FS above asked how someone doesn’t pay any taxes (presumably without breaking the law, after all, if you are willing to break the law anything is possible, including bank robbery).
No one has provided anything substantive. FS sounds like he understands the tax code very well, hence his poignant question. Those who make more not only pay more but pay at a higher rate. Yes, there are “business expenses” that are technically deductible depending on what kind of business entity you have and the nature of the expense. But there are strict rules around that, it only goes so far. I am very familiar with them.
Please get your facts straight.
Really NOT fair. 10% of 20K is 2 grand. Quite a chunk out of 2o grand.
10% of 100 grand, not such a big chunk. Flat tax is just plain unfair.
10% of $100K is $10,000 in taxes, or 5X more than $2K. What’s wrong with that?
A flat tax ABOVE a minimum income level is what’s fair. I wouldn’t expect a flat tax for someone making below poverty wages at all. Let’s called it flat tax per individual for every dollar over $25,000.
Agree 100%! Loopholes must be filled and everybody should pay their relative fair share. But that is not enough, in a wealthy country like ours the basic needs of all should be secure. The ten top earring countries mentioned give a lot more security to their citizens then we do, from end to beginning, nursing homes are heavily subsidized if not free, so is medical care, education, and infant care. In our “civilized” country these services command a hefty price unattainable to most, whereas in ALL truly civilized countries basic needs are taken for granted, and so they must be to level the playing field. One cannot thrive with a Damocles sword hanging over his head. Once the playing field is level and the sword seethed then entrepreneurship and hard work (definitely more then 40hrs a week, at least in the beginning) will have a much better chance at rewarding the applicants.
Not really a comment on your letter but I do not see how to get to write a letter without “replying” > In any case I am not interested in AGI I am interested in total income. AGI is a another tax haven If I earn $200,000 in tax free bonds and pay no taxes I still have about $4,000 a week to live on. If I have no deductions, family of 4 and earn 26,000 I also (according to this article pay no taxes..(about $400 a week) so who is better off? Duh…never use AGI in any comparison, it is a sure sign you are rich.
Partnerships are beautiful creatures my friend! Hire a tax lawyer. It’s worth it in the end.
I doubt this is a real post, particularly knowing something about the tax code and the statistics in question.
Please tell us a little how you are able shield such income, as you say it’s not illegal.
Or is it essentially real estate appreciation that is adding to your net worth (as apposed to cash income)?
What nonsense. You’re anonymous. Tell us how you do this. You are full of it.
The sad part is, people hear this kind of thing and they believe it. Guarantee he can’t tell us how he does this, because he doesn’t.
AND…dont kid yourself…NON-wealthy people hide income from their AGI, AS WELL.
That’s a very important point Bill Richards (not to keep continuing this thread but it provokes thinking). I read a study a couple years ago, I think it was done by an Administration or the CBO, but it found roughly 1/2 of money income from those under the official poverty line is NOT reported. They determined this and other findings through direct interview of a large sample, not the typical meta-data analysis of broad reported statistics. Meaning this fact will not come from IRS data for example.
And it makes perfect sense as well (in case someone wants to raise the BS flag). They not only likely have jobs where this is more frequently the case (e.g., cash work, self employed or working for an individual or small business that can more easily escape reporting requirements), BUT they are motivated NOT to report themselves. By doing so they are able to obtain or maintain greater benefits from the state. You can hardly blame them, they are acting rationally (perhaps not morally).
This is absolutely true. I’ve done bookkeeping and seen it many times. It is pretty easy to legally expense 100% of profit from a business, leaving nothing to tax. I’ve worked for three or four small businesses that do this. It’s really quite simple and easy to do.
First, register all your vehicles as company vehicles and expense the cost of those vehicles, plus all gasoline and maintenance costs; Expense all health insurance costs, co-pays, and deductibles; Expense all travel and entertaining that has anything to do with your business or is done with a client or employee; Expense all payroll and company retirement contributions (make sure to put the maximum in your own, so you can write off the entire $53,000 as a payroll expense, and make sure that your spouse and children are ’employed’ so you can contribute up to $53,000 to their plans, tax free, as well); Expense any other items that are related to your business, including newspaper subscriptions, charitable contributions or advertising, continuing education expenses, city, state or federal licenses, fees or requirements, all telephone and internet service (including personal phones and computers, if you use them to communicate with customers or vendors); Expense home office space from your mortgage; Expense any security services related to business done at home or at business location; Expense customer and employee ‘gifts’… I’m sure there are more, but those are the main ones.
In a larger business, taking no salary whatsoever (meaning no earned income to tax) and taking instead ‘deferred gains’ or stock options puts even $25,000,000 into the lowest capital gains tier of 15% (meaning the exact same percentage of tax is due for the twenty five million dollars as an earned income (W-2 or 1099) of less than $37,400 in 2015.
They would get buried in an IRS audit. The expenses must be business related. As a bookkeeper you should turn these guys into the IRS and get the 10% finders fee.
Wouldn’t be worth it. The expenses he lists are legit, but only the portion directly related to business. Which means you have to have records of what trips were for business, what were not. But, if you want to go to Hawaii for a vacation, just make sure you attend a conference there – and deduct the airfare, hotel, meals, etc. For an individual, unreimbursed business expenses aren’t deductible until you reach a certain amount – then they are only deductible after that point. If you own a business, nearly every dollar of the Hawaii trip is deductible. No minimum necessary.
But, there are tax incentives against working for yourself, as well. For example, you must pay the self-employed portion of your payroll tax – which would be covered by an employer. My daughter baby-sat last summer to earn money for college. She made less than $800, but had to file a Schedule C (self-employment) and pay the SE tax. She didn’t pay Federal or State tax, but there is no minimum on the amount you earn before you have to pay SE tax.
Check it out! https://www.financialsamurai.com/whats-the-right-ratio-between-salary-and-distribution-to-save-on-taxes-and-avoid-an-audit/
Wow this article is moronic. ‘Work more than 40hrs, anyone can do it!” What a joke.
Please explain why you think working more than 40 hours a week to get ahead is moronic. 40 hours is the average work hours for Americans. If you work more than average, what do you think happens?
You become better than average, duh!
….”become better than average”…how do you propose that a person become that “better than average” person when there are not (and history proves never has been) an adequate number of jobs to provide the necessities required to live independently in our society?
Madeline, your comment makes you sound like a crazy person. You are not serious are you?
I wish I could “like” the comment from Fermi’s Paradox.
“… there are not…adequate number of jobs to provide the necessities required to live independently…”
Maybe Madeline meant: there aren’t enough (adequate) paying jobs which allows a single person to live independently reasonably. In the average urban areas, the cost of living still outpaces minimum wage rates which allows this.
And that has always been the case in large cities. That’s why many people have roommates early on in their career, or rent rooms, or…
People didn’t just expect to get any old job and be living the high life back in the day. Now we have all these luxuries that many consider necessities, and suddenly they complain that they can’t afford the actual necessities.
40 is the perfect amount of hours.
9 to 5 is 8 hours, times 5 days a week = 40 hours.
Average.
Great discussion and positivity, 2 things we rarely see.
I agree, what kind of a life is it if you’re working more than half of your waking hours through the week? Making all that money just to come home and go to bed? I understand that some people are workaholics and can’t stand not being busy, but all work and no play drives most people crazy. You have to have free time to enjoy outside activities.
People who work 40 hrs a week don’t even work 25% of the hours in the week…. just saying. You could work 80 hours a week and still not even work half the week.
I just wanted to say sleep is required in humans. The number of waking hours in a week (minus 8 hours of sleep times seven days a week) is 112 hours. 40 hours ÷ 112 = 35.7% of waking hours or pretty much 35.7% of your life. 80 hours would be 71%. Just saying.
right. productivity is yet another issue.
but there are still a lot of people who consciously choose to maintain 2 or more regular paying jobs – just to feel “comfortable” financially.
though there are a lot of job openings, filling them is a challenge as well; as employers can’t find applicants with the skills needed (to be productive immediately). but that also highlights the fact that companies today are less-likely to want to train new un-skilled staff & rather over-load existing staff with the increasing demands.
In the words or Ari Gold: “9 to 5, yes I remember my first part time job”. If you think you will get to $250K by working 9-5, then please do not complain when you are in your 40’s and still making the average income
Hah! Wonderful quote from good ‘old Ari. One’s earnings income certainly gets capped as an employee.
Your quote reminds me of this post: Are There Really People Who Work 40 Hours A Week Or Less And Complain Why They Can’t Get Ahead?
Hear, hear. If I could make $250k working 9 to 5? lol I would try to make $400k for 60+ a week. I wouldn’t know what to do with myself if I only worked 40 a week. I would feel lazy.
If you will go out into the economy and do for two years what other people won’t do, you will be able to do for the rest of your life what other people cannot do.
Let’s thank the rich? Seriously the wealth gap is greater than it ever has been. I’m glad my work doesn’t want me to work more than 40 hours a week because I work my ass off in those 40. If you want to get ahead you have to be motivated and willing to spend time outside of work learning new skills though. I spent a lot of my free time learning programming and computer science and now I am lead data programmer at my print company.
One of the main reasons why the gap between the rich and poor is rising is because the education requirements for even the most mediocre jobs are rising and the poor are either unable to obtain the needed education or they don’t wish to go into debt to get one. But, I can’t blame this on the wealthy, the competition for jobs is what drives up the requirements; I hate to say it, but people just have to compete harder nowadays than ever before, every generation from now on will have it harder than the one before, especially if you are in the lower tax brackets.
The wealthy pay massive amounts of taxes and it’s really the responsibility of the government to make sure it goes to the right places; judging from observation, it is not doing the greatest job.
You are right about government responsibility. I lived in a city where artist could be paid by the government to paint horses and drains in the city.
Instead of government grant money used for this it should have been part of a course curriculum for an art degree at the local University.
There are so many government funded programs that waste money this way,
Dumbest remark I have ever heard. If you work as an artist you eventually have to get paid for some work, be it from the private or public center. What is the point of sending more artists through college if there are no jobs for them once they are finished? And, art is one of the few occupations that people can learn on their own if they are blessed with talent, ingenuity and work hard.
I only see one problem with your comment. The competition for jobs is due to the fact that more individuals have undergraduate degrees because of for profit and online schools. A bachelor’s degree doesn’t mean the same as it used to because of the ease that many programs have made it to earn one.
I rent apartments in a poorer respectable area of Milwaukee. Now college grads in many fields in their thirties are finding they are delivering pizzas and waiting well into their thirties. bright, well trained people working two jobs, having trouble getting by.
30 hours makes a better work week, but these people are working long hours and unable to live independently. Experience has taught me.
Forget about gaps. Grind it out and earn what you keep. When you do that, gaps are going to show up. Not everyone has your hustle. This is a good thing. Don’t fault them for it. Be comfortable with your place in the world. If you were going to be the ultimate billionaire you would’ve been born that way.
I really don’t like your suggestion that people should work 60 hours a week, or any more than 40 for that matter. If one loves the work they do, then we do more of it and chances are make no more for the additional time (salaried). To suggest that American workers compete with the slave wages of China, or Viet Nam – I think you’ve got it all wrong. Corps. should not be free to seek slave labor in other countries. And we should be pushing for an international minimum wage as well. Your suggestion is just work for money, no family, no creative outlets, walks in the park – just work to compete with low wage countries so big corporations’ CEOs can get richer. I’d like to see us live like they do in Denmark.
Europe is the best! I’ve seen the future, and it looks so bright.
I’ve also been hustling seeing how life is like driving for Uber recently. Very eye-opening! Check out both posts.
I’ve consistently worked over 60 hours a week for 16 years in a row. If the average person works 40 hours a week, then I’ve been able to use 16,640 more hours during this time period to earn more and create more. Working 50% more for 13 years is why I was able to exit the work force at 34.5 and just write on Financial Samurai for a living.
Choose your destiny!
Well said.
There’s two parts. Working hard, but also having a job that pays well. It’s pretty tough to get ahead on minimum wage. It seems likely that the uneducated will be squeezed more and more as they compete with overseas labor and automation.
Absolutely. GOOD hustle. Thing is…before you had your game tight, think back. When you were grinding it out for little to no compensation did you EVER in your wildest dreams think you would get to the place you are?
I didn’t. One day I just thought…I need to do something. This isn’t working. I have got to step up my game. Then I started looking for ways…
Love it. To get where I am I only had to be a janitor at night and pick up dead bodies for a mortuary 24/7, all while securing bachelors degrees in business and political science during the day. It took me 7 years. No assistance, and no complaints on my part while I watched my contempories piss away the dollars given to them to go to school. I now pay more than 10x the average income in the US in taxes alone.
This is not to toot my horn. It is only to say that anything is possible if you work at it. I realize there are physical and other limitations that hinder many. That is what the system is for. All I know is that hard work and gratefulness goes a long way. I also know that the entitled mindset in the millennials that I interview regularly is sickening.
Given your history as a janitor, have you read this post?
Abolish Welfare Mentality: A Janitor Makes $271,000 A Year
Terrific, and for those that think getting an education is too expensive, please quantify the cost of ignorance.
There is a difference between a degree and an education.
And many do great without a degree. I know a heating/AC tech who just retired at age 60 with an annualincome of $150,000 plus medical including dental and vision.
If you do not want to work hard, I suppose you should be happy what you got and do not talk about fairness when you see others are way ahead of you in terms of wealth.
I was on unemployed not that long ago, I enoughed work 40 hours a week and think absolutely nothing after work. I lost my job, things turned around. I made at least 3 times my salary at my old job, and it keeps growing. But I have worked about 10 to 12 hours a day, 7 days a week. My daughter grows up on her own and she is the best student in her high school.
You can not get everything on your side. You get something and you may lose the other. Pick what you want.
Then move to Denmark. If you want to get ahead, you must either win the lottery or work more than 40 hours a week. If you don’t want to, that is your choice, but that decision means that you don’t get the new car, the iPhone or the new house. If you expect those things, then expect to work more than 40 hours a week.
Denmark? You mean the country where people can not afford to buy a car (that’s why they ride bicycles not by choose or the care for nature) of not to talk about largest depression numbers and suicide in the world. So before having opinions lets spent time on education to see if thoughts wished really match with reality. As far as earlier comments, i am a first generation immigrant who didn’t even speak a word of English, didn’t have a place to stay a job or knew people or have grants scholarships for education. I made it! Yes it took much more than 40 hours to be exact 120 hours a week an 80 hours min. while in college full time. So it is still very possible only the person should have the desire to want to get out of poverty. I am proud to say i went from bottom 1% to top 1% in a matter of 20 years. Yes it takes time a lot of hard work but American dream still exist today! Please don’t blame this that, anyone can choose to educate themselves and make this happen. If you want to college bad enough yes you can with loans, it will require you to work jobs during but it is very possible! Oh in the meanwhile i took care of older parents and a younger sister whom i also helped and they did not received ANY government benefits.
I agree with the article. I an an auto mechanic, I work a little over fifty hours a week and make just under thirty thousand, which in my area is actually a good wage. I used to think that the rich should pay more, but in the last year ice actually come to realize that they pay the majority of everything. I don’t think that working more hours in necessarily feasible for everyone. But more than forty is not a sacrifice when you want to earn more. The only reason that I an where I am now is because I spent a few years working sixty or so hours a week at crappy jobs. I used to work twenty something, but at that time I was practically homeless. I feel like for the majority of people in my situation it is the result of poor choices made in the past. I know that’s why I’m in the situation that I’m in.
As a small business owner. I would highly recommend starting your own business. In fact I would turn the whole business model of auto service on its head and be mobile without a shop. Then you could service people’s cars at their house. That way you could perform routine maintenance and diagnosis at their house. That would be a great time saver for a lot of people.
I can tell you what is wrong with working more than forty hours a week.
1, The family falls apart because of time and stress.
2, It only increases the drive for a drone population,
3, You mind body and spirit weren’t meant to do this. You will break down your body before your time,go crazy, drive others crazy and perpetuate the myth that you can pursue happiness via over work.
Why do I think this? I am living proof. I thought I could be wonder woman. I went through two marriages, and now my health has failed, and all before fifty five.
Young people consider yourself warned.
Definitely good points.
Check out this latest post: Income Profiles Of Financially Free People. I think the charts will open people’s eyes to what is possible besides just being a cubicle drone.
Your statement is more of the problems with today’s society. In the thirties and the forties people work more than 40 hours a week. Although one person was the bread winner of the house, generally. And the amounts of divorce back then in households was miniscule compared to today
The amount of divorce has increased dramatically for many reasons, but your implication that a single-income earner in the household was somehow better is not really factual or even comparable with today’s global economic reality. Divorce was lower in the early twentieth century (and before) for a myriad of reasons, one of which was complete and utter dependency on that single-income earner by the other members in the family, with little or no laws in place to protect those dependents in the event of divorce.
A lot of companies won’t let you do more than 40. If you do work more than 40 by getting multiple jobs they start to butt heads. The idea that all you have to do to be successful is MOVE somewhere.
Well I hope you don’t own anything, because moving across the country is expensive. I also hope you have a year’s worth of wages, because you’re going to need it while you find work, pay for your security deposit, adjust to the higher costs of living…
Then you’re gonna end up running out of places for people in San Fran to live…
Higher wages equals more spending power. More spending power means more economic freedom more economic freedom means the ability to support more small businesses.
The only way for there to be a healthy thriving economy is for the BOTTOM to be able to help pay for innovation. You can’t just expect a bunch of angel investors and assholes to create every job in the country.
The blog writer is probably the dumbest person I’ve heard arguments from in a while, and fact of the matter is I spend too much time reading Youtube comments. That’s a low bar.
Check out:
Income Profiles Of Financially Free People – Lots of examples of people hustling, and not complaining
Financial Independence: Maybe You Don’t Want It Badly Enough – More examples, but it might piss you off how folks are hustling.
@RealDealExpert: and yet this recommendation makes lots of of sense. The one way I personally found to get ahead is to run my side gig in addition to my day job. When all is said and done, I easily work 60+ hours a week, and from a financial perspective it is worth it: I have additional income, and it is diversified. If I ever get fired from my day job, I now have a backup.
But, yes, there is some time sacrifice to be made here!
It depends how much you make an hour. I’m 16 and worked at a summercamp last summer. I was making $132 a week, working 72 hours a week, five days a week, and making about $1.80 a hour. So I was obviously working more than the average person but making way less.
These comments are hilarious. “History proves that there aren’t enough jobs”, working more than 40 hours a week is “moronic”. Apparently I bucked history in a moronic fashion :)
How do you earn 1600 a month at mcdonalds? At 7.25 an hour you would have to work 60 hours a week. To earn that. There are no McDonald that hires anyone for more then 26-30 because after that you are to earn 401k health insurance other benefits. No mcdonalds or even Walmart for that matter does that. Your lucky to earn 60 hours for two weeks.
i find it disconcerting that half the work force makes less than 33,000 a month. also he says to move to san francisco where the action is but the average 1 bedroom apartment in the bay area is $2,230 a monthi find it disconcerting that half the work force makes less than 33,000 a month. also he says to move to san francisco where the action is but the average 1 bedroom apartment in the bay area is $2,235 a month so there goes around $26,808 of your earnings just for rent right there. lets hope you dont need food or insurance or god forbid want to raise a family.
33000 a Month??? I hope you meant 3300 because 33000 a month is 396,000 a year. Which would put you in the top 2%…
Please verify month to year as in 33000 a year versus 33000 a month.
If you want to raise a family, you better make 3-5x your current expenses – that might mean making sacrifices — BEFORE YOU START to raise a family. That is – if you want to be responsible to your kids by SETTING AN EXAMPLE. No excuses. I paid for school myself, took loans, took RISK, and worked 2 jobs at a time and going to college to get where I am now – making 90k/yr working 32 hours a week. I wasn’t going to start having kids or even think of raising a family when I was making $9/hour. Making dumb / idiot decisions and not thinking of your future FIRST – you’ll deserve what you get because you reap what you sow – btw – it’s never too late to learn skills that employers will GLADLY PAY YOU WELL FOR.
If 50% of people are making crap money, all you have to do is STAND OUT from 1 other person – and you will get paid more for it. Btw, you need to sell yourself and believe you are worth A LOT more than what you are currently getting paid.
Some of my friends were working 40 hours a week while still in HIGH SCHOOL – because they were determined to become doctors and DOING WHATEVER IT TAKES.
I just don’t have any more empathy for broke people that had kids without thinking of the future they can provide for them.
Yes, sentences like this made me think this was a satirical site: “If you are in the bottom 50% of Americans who earn less than $33,048 a year, know that you can earn more if you want to. Half the battle is just moving to a vibrant location such as the San Francisco Bay Area where billions of dollars are flowing in due to technology innovation.”
It really doesn’t get more delusional and smug than this!
Are you saying you are POWERLESS to earn more? There is an entire gig economy out there with ridesharing, tasks, etc that help anybody with desire to earn more.
See:
What’s It Like Driving For Uber: Mixed Emotions
Income Profiles Of Financially Free People
Blogging For A Living: How Much Can You Really Make Online?
Don’t just accept your situation. Take action. Adopt an ABUNDANCE MENTALITY.
Yeah uber is great until you add costs ($1.00 per mile in Los Angeles, California, Check Auto Club stats) and taxes! Working 60+ hours a week destroys family’s and friendships. Many Europeans work way less hours than Americans and are more productive and happy (Germans for example).
It’s a tradeoff, isn’t it? I went to Europe for a couple months to do research, and I wrote about it:
I’ve Seen The Future And It Looks So Bright
Learning From The Happiest People On Earth
It’s hard to have it all. But I think it’s worth trying to accumulate as much wealth sooner, rather than later to have OPTIONALITY in your one and only life. I think starting your own site helps increase your chances of freedom.
This entire article is a load of hogwash. How are you supposed to drive for Uber when you can’t afford a car?
I work 24 hours a week, 4 x 6 hours days from home. I make enough money to live, but I can’t afford to get $36,000 for Implants that I need because I have 5 teeth missing.
You seem to forget that some industries like mine (programming) have to compete with the entire world.
I do work more than 24 hours a week for my own business, but so far I make about $10 every 3 months because open source doesn’t pay very well.
I hope you all choke on your caviar.
I prefer In N’ Out burger myself. So yummy!
Check out:
Are There Really People Who Work 40 Hours A Week And Complain Why They Can’t Get Ahead?
Why Tough Love Is Important When It Comes To Your Finances
Read this one if you want an easier life: How To Build Emotional Intelligence. Hint: insulting people doesn’t help.
Best of luck to you!
Why is the Police Chief getting paid 320,000 USD a year and such a large pension….? When a 8% return on a municipal retirement bond is close to impossible to negotiate? Deprression with infrastructure? ??
I’d be interested in seeing the breakdown of the one percent, like income differences between the .1 percent and .01 percent for example. Any recommendations on where to find this information?
It’s very surprising to find out that I’m in the top 5% of wage earners. I know that I do pay an exorbarant amount of taxes per year (26,000.00). Even though I’m making a lot more than most americans, I still rent a house and drive two vehicles that have over 100,000 miles on them. I’m a trucking company owner operator with just one truck that me and my wife operate. We travel about 5,000 miles per week at a rate of 1.52 per mile. That’s 7,600 weekly less expenses for fuel which is usually (depending on the road and weather) about 2,500 weekly. That leaves 5,100.00 weekly to operate and maintain the truck which costs on average about $150.00 per week.
The reason I’m posting this is because I see all these big houses and folks driving these big cars and I wonder what it is that they do for a living to be able to afford all of that….. Maybe I just don’t know how to manage money??
Depends what your net worth is too? Income is just one variable.
I also believe there’s a lot more wealth out there than meets the eye.
Check out this post https://www.financialsamurai.com/2012/05/14/the-average-net-worth-for-the-above-average-person/
Having spent some time assisting people with lower incomes with completing their taxes, I have first hand knowledge that people making <20,000 a year are PAID money they have not paid into the tax system according to how many children they have. Effectively we have incentivized people with lower incomes to continue to have children. My family decided to have only two children in anticipation of assisting them with college and a start in life, and are now the new minority. The mass majority is voting to increase taxes on anyone who makes over 250,000, effectively picking our pockets.
Personally, I would like to know how much of my 60-80 hour work week you would like to share in.
I don't even want to increase anyone's taxes – but could you please stop giving the money I pay in to people just because they can't/won't find a condom simply because they know the government will help pay for their children with my tax dollars?
Interesting insight! Pretty neat the government incentivizes lower income folks to have kids and cuts off child subsidies for those making over a certain amount.
The other way to look at it is this way: Maybe having kids isn’t so expensive? If a family of 5 can live off $40,000 a year, then obviously kids are not that expensive, or at least not the $500,000 price tags from 1-18 that some studies report.
And insofar as thanking the rich for paying more taxes, considering 90% of all wealth accrued over the past two decades have gone to the top 1/10 of 1%, and they got two tax cuts over the past decade under W, and that capital gains gets taxed at half the rate of labor, I’m not entirely sure what we are thanking them for.
That they bribed congress for special loopholes and treatment so all their good fortunes get taxed at a lower rate? When they have garnered most of the gains that labor catalyzes? I’m part of the top 4% and I find that thought repugnant. Thanking the top 200 families or the top 1/10 of 1% of this country for hoarding wealth, see the Fortune 500 hoarding 1.5 trillion cash on their balance sheets as exhibit 1, and the fact that tax cuts received by rich were invested overseas for highest returns, infuriates me.
The poor pay payroll and sales tax that is terribly regressive. Thanking the poor for paying such a regressive rate, and their own way, while leaving the Paris Hiltons of the world nice loops like the inheritance tax exemptions is an insult to talent and meritocracy everywhere.
” the fact that tax cuts received by rich were invested overseas for highest returns”
The US has the highest corporate tax rate in the world. Bring this down to 0% and just tax capital gains at ordinary tax rates and you would see far more investing here.
And yes, the “rich” (including you in the top 4%) have received tax cuts but as a % of total taxes, the “rich” are paying more now than when Clinton left office.
Govt waste comes in two big forms. Defense and healthcare. Medicare’s 2% administrative overhead beats out any private insurer. And until healthcare reform happened, and healthcare costs stopped rising double digits for two years in a row now, that was the singular biggest driver of public and private debt in this country. And of course defense. Post 9/11 we doubled the defense budget. To catch a few hundred cavemen bombers in hiding.
Everything else is chump change. Blaming the powerless and poorest among us for the economic sins of the wealthy (healthcare and military industrial complex) is just misplaced puritanism writ large.
The point with lowering tax raises results in increased revenue is not entirely true. A better estimate of the benefit of tax cuts/increases is to look at tax revenue compared to the GDP.
Look at this ratio over the last 30 years.
The federal minimum wage was $4.25 in 1993. Why were you only making $3.50?
https://www.taxpolicycenter.org/taxfacts/content/PDF/state_min_wage.pdf
Do you realize you just took Mitt Romney’s right vote away from him? When’s the last time Mitt had a job? And we can start taking away people’s right to vote right after we take away the right to keep and bear arms.
Facts that the GOP and the wealthy don’t want us to Know. 1) The last time marginal tax rates on the wealthy where this low was right before the great depression and 2) the top 1% now earn over 23% of the total U.S. Income. The last time it was that high was again 1928 right before the great depression- It was less then 10% during the 50’s and sixties. — Scary stuff huh? They also had the predecessor to the TeaParty (financed by billionaire Koch Bro.) back then called the Liberty league (Financed by JP Morgan). Backed Right Wing Anti Tax Anti government Politicians. Published a Newsletter and said all the same things–blaming the poor and unemployed for the weak economy. They self destructed (got close to being Tried for Treason) and alleged to have made a deal to stay out of Jail to stop blocking FDR’s programs and disappeared until reincarnated as the Teaparty. FIX THE TAX CODE AND GET AMERICANS BACK TO WORK. pass it on. Check out the facts and Pass this on to everyone. Why don’t they take a look at the top .5%.
Waw, those are some really impressive figures. There are countries where they would work more than 10 years to earn how much others are doing in one week….
I earn a decent salary and do not mind paying my taxes. I’m grateful for my opportunities but what I do have a problem is the manner in which our government wastes my money. It leads me to want to live elsewhere. There’s no insurance or security these days and that’s scary even if you make a lot of money.
My address is not to be passed on please.
I’m not smart enough to figure this out, but I was curious if that instead of a national & state income tax, we instead did away with state sales tax and just charged a 10% national sales tax on everything, except food and medicines. Can you somehow estimate what would be brought in and distributed to the states and feds? This tax would be paid by everyone, from kids buying an ice cream cone, to seniors buying a pair of stretch socks. How much would hit the treasury? We maybe even be able to eliminate some of the greed. And we could probably eliminate the IRS and all of those employees. More savings.
Reading these posts is frustrating….
Some readers post on here where someone paid the same percentage as they did on their taxes and they were livid. I find that comical. Warren Buffet was said to pay the same percentage as his secretary but the difference is he paid 7 MILLION DOLLARS in taxes people. Paying the same PERCENTAGE doesn’t mean your paying the same amount. It only represented 17.4% of his income but it was certainly a lot more money than they were paying in. Why should those that make more pay a higher PERCENTAGE. For God’s sake the man paid in 7 million dollars. Maybe get rid of tax breaks. But socialism doesn’t work look around at all the other countries. Warren Buffet is paying his share and quite a few more peoples share. It’s big government spending. Did anyone pay attention that the pay raises that were approved by President Obama. I’m sorry I didn’t realize our Government officials were falling on hard times and needed pay raises at this time. If anything didn’t they need to cinch their belts in considering the massive debt every child born in America inherits. With the economy and unemployment and Government spending out of control it just goes to show how out of touch they are with the American people and who they are supposed to represent. It shouldn’t be me and you against each other it should be all of us demanding more and better from our government.
I think where ever a person is they look at how it affects them and looks no further with their argument and sometimes without realizing it they could quite possibly be arguing the same point. As a wife of a business owner it amazes me when people say ” Yeah we need health care…businesses should provide it. Well in our business if we provide it to everyone it would cost our business $750,000. per year. We can’t afford that. It’s shocking to us that we are just supposed to come up with that money. So what will happen is we will pay the penalty of about $350,000 (God willing) and it will mean people will lose their jobs and pay cuts. What will our employees gain NOTHING they will actually lose jobs and pay. The Government will collect allot of penalty money of small businesses but I don’t know how it’s going to help small businesses or our employees.
As far as the richer paying the same percentage as someone making a smaller amount like say Warren Buffet.
Tonya, thanks for sharing your thoughts. You will love this post then: https://www.financialsamurai.com/2009/10/09/were-idiots-please-tell-us-a-flat-tax-is-not-fair/
$750,000 for insurance at a small business? That sounds insane. I would seriously consider changing providers. But don’t worry, healthcare exchanges will be around soon and you can shop around and compare. Additionally, you can stall, and face the penalties (the fine amounts you are quoting sound like pure fiction unless your ‘small’ business has 175 full-time employees ($2,000/per full time employee)
Here are some facts from the Wall Street Journal (June 28, 2012) to help you get an honest grasp of the actual penalties for small firms.
Once your firm reaches 50 full-time equivalent employees, a penalty will kick in if you fail to provide coverage for employees who average 30 or more hours a week in a given month. The penalty is $2,000 for each full-time employee in excess of 30 full-time employees. There are no penalties if part-time employees aren’t offered coverage.
A key factor in calculating the penalty is that the equation isn’t based on full-time equivalents, but rather on actual full-time employees. That means some businesses that are subject to the penalty may end up owing nothing.
Here’s a basic example: Say your firm has 25 full-time employees and 50 half-time employees that, combined, equal 25 full-time equivalents. Your firm, in effect, has 50 full-time equivalents and would be subject to the penalty if you don’t provide health-care coverage. However, your penalty cost likely would be zero because the $2,000 tally starts at the 31st full-time employee and you only have 25 full-time employees.
You can’t just buy any old insurance to avoid the penalty. You have to provide so-called “minimum essential” and “affordable” coverage. Minimum essential coverage means covering 60% of the actuarial value of the cost of the benefits. And affordable means the premium for the coverage of the individual employee cannot exceed 9.5% of the employee’s household income.
If the coverage you offer is unaffordable, qualifying employees can get subsidized coverage through the tax credit on the state exchanges. In such a case, you will have to pay the lesser of $3,000 per subsidized full-time employee, or the $2,000-per-employee penalty after the first 30 full-time employees.
Let’s be honest. For the last 25 years, most businesses consider their entire employee force part-time, while reserving full-time position for management (while already offering insurance to those individuals). Many companies, like McDonalds will not notice at thing, while their employees making wages near poverty level will be able to buy insurance for themselves at dirt cheep rates through state exchanges. While this will add extra burdens on states, the Feds will be funding this at 90% at first, reducing down to 70% and staying there, so states should do fine as well.
In other words, just make your employees part time and don’t contribute crap, but please stop spreading fear and ranting about it, when it hasn’t cost you one cent yet.
I just read all of the above comments and replies. I must be middle class, because of all the comments the “Middle Class” one makes most sense to me. Regardless of how one twists/interprets the issues, the bottom line is that it is getting harder to provide for a family’s basic needs in America. It used to be that a person working 60 hours a week at a regular job, even at minimum wage could provide basic housing for his family. I just read a report that many lower income families are now having to live in homeless shelters because there is not enough low-income housing; and I have a real estate friend who told me that most of the cities in our area will not allow builders to build low income or starter homes. I just read a report that shows that in the last 15 years the poorest 20% in our country have experienced a decline of income of over 11%, the middle 20% have experienced an increase of almost 2%, and at the same time the richest 5% have experienced an increase of over 10%. It appears that the rich are saying to the rest of the world that they will stay rich, regardless of what the rest of the world is experiencing, and that is their entitlement.
You can argue these points all day long and you can twist statistics to suite your argument, but facts are facts, the government has had to create jobs before and it works. Our Taxes are at an all-time low. Our country needs our enter structure repaired, and that not only creates jobs and tax revenue it takes people off unemployment which cuts government spending. Plus those people can buy; you know the basic way to grow the economy. Big business needs a reason to create jobs here so they need tax incentives to do that, but they also need to be taxed heavy when they want to take jobs out of the country just because we have a higher standard of living and they have to pay the worker more, that’s how our economy works. One big problem with our debt is the wars we have been in and not paid for. I wonder how quick our Congress would have voted for the war in Iraq if they would have had to add a cross the board % war tax on everyone to pay for it, and better yet how long we would have stayed and how much enter structure would we have paid for. Sure we have to deal with entitlements, but come on we keep printing money and where is it going? Not to the middle class. The middle class wages are stagnant and the rich are sending their money overseas to make even more money. All the people on entitlements are putting it back in the economy. Agreed it’s still a drain but at least it’ staying in the US economy, but these law makers need to do their job and quit blaming each other. Charity starts at home so if you want to blow people live with the consequences, don’t spend my money overseas while we have people going hungry here. I didn’t ask them to go over there, and I didn’t give them poor intelligence about what was going on over there, and I darn well didn’t tell them to spend my money rebuilding their enter structure. These law makers have a good gig, give themselves raises, collect money from the lobbyist, and blame everyone else for the problems. WAKE UP AMERICA
It’s a basic conflict between Friedman or Keynesian advocates, with a lot of erroneous ‘facts’, and poor understanding of economics, history, law, and/or ethics. Austerity measures only work effectively when done at the correct time. There are other ways, however. Take a look & do the math:
https://www.alternet.org/economy/8-tips-how-we-could-cut-deficit-slashing-social-security-benefits-wont-help#.UNMdnY_RPH4.facebook
New law: You only get to vote if you pay federal income taxes.
If you receive government subsidies, you give up your right to vote until you become a “productive” member of society.
I have to submit to Federally mandated background checks, physical exams, random drug and alcohol testing, and recurrent training with competence testing to earn my (private sector) paycheck. A fraction of my pay gets redistributed to people who abuse drugs , alcohol, wives, kids, and/or “the system.” It seems to me that if we pay people not to work, and don’t attach ANY strings to the benefit, we are not fixing the problem. I gotta jump through the hoops to receive my pay, how about drug/alcohol/background testing to receive benefits?
We have a moral problem. We feel no responsibility to spend within our means, no remorse in forcing others to pay for the overspending of others. Instead we demonize the 1-2-3-4% who contribute 30+% of the government’s income to redistribute; effectively buying votes. For the middle 50-96%, entitlement spending means there’ll be less money saved for retirement, forcing a number of them into the dependency class upon retirement. Take the savings requirement test and see what a difference an extra $100/month makes over a lifetime.
The current spending path is unsustainable financially. Keeping people dependent on government, empowers politicians, not the citizens. Remember the whole reason America was founded?
Yeah! Kick ’em when they’re down!!! Are you elderly or disabled, or you can’t find a job because the rich CEOs are sending jobs overseas and then collecting millions in bonuses? Then screw you! You can’t vote either!! A lot of those people who are not paying federal taxes were productive and/or defending our country long before you were born. Sorry that you feel that you are being “demonized” (that must be so hard), but when Mitt Romney pays basically the same effective tax rate that I do, I don’t think the rich are being punished. We should be fixing the tax system to give businesses tax breaks for creating jobs in the U.S. and taxing them heavily for sending jobs overseas. I don’t care how much you make, if you are ACTUALLY a job creator, then you should get tax breaks. If you make millions from being a CEO of a large corporation (e.g a big bank), then you are not a job creator, and your paying a higher tax rate is not going to hurt the economy, in my view.
Janna
I’m confused; Rich CEO’s are bad for sending jobs overseas, then Romney’s bad for paying the tha same tax rate as you and I. Romney was a huge employer via multiple corporations that he turned around. Most companies stayed solvent and stayed in the US, some expanded into major corporations. Romney received compensation for this in the form of stock options (which ties CEO’s pay to company performance) and he is now a rich man who has paid every bit of his taxes due (contrary to Tim Geithner and Harry Reid). Romney’s current taxes are at a rate of most retired people living off of their savings (he’s gonna get slammed by taxes when he turns 70 and has to take RMDs).
Your quote, “if you are ACTUALLY a job creator, then you should get tax breaks.” So only liberal/democrat/socialist job creators should get tax cuts while religious, white, wealthy, straight, faithful family male like Romney should be “punished”? These are your own words?!.
You say, “screw me” and also that I think that I’m “being demonized.” Again, I’m confused; I would submit that YOU are being demonized. Your “news” sources are just filling you with hate (just read your own words!) for your fellow Americans. It worked in 1939 Germany too.
@real issues: Yeah, I see that you are confused….. I didn’t say “Screw you” to you… I was paraphrasing your idea that only those who pay taxes should vote. YOU are saying “screw you” to those you would like to prevent from voting.
And I didn’t say that the rich SHOULD be punished… I am saying that they are NOT being punished, as you would think they are if you listen to Fox News… And where did I say that only liberal job creators should get tax breaks?????????
And I DON’T THINK you are being demonized…. YOU think that!!! (Just read your own words!)
So yeah, you summed it up pretty accurately when you said you’re confused. And I am in no way filled with hate for my fellow Americans. You may be projecting your own feelings.
“Romney was a huge employer via multiple corporations that he turned around.” That’s more than a bit misleading. Bain Capital (during as well as before and after the Romney era) “turned around” companies by slashing costs, and we both know that means jobs. Companies who hired Bain were doing everything they could to reduce headcount. Sure, they were huge employers, just not quite as huge after Romney came to the rescue.
Should the rich pay a lot more in taxes? Look at it from this point of view, it cost a lot of money to manufacture an aircraft carrier, a jet plane if fact any weapon. The people who put their lives on the line also have to be paid. Now Donald Trump ownes this hotel and casino, my holdings compare to that compare like the size of a bebie to a railroad box car, so he should pay more insurance for his protection. Remember insurance for real estate have a war clause that says they will not reimburse you if you lose your property to an act of war.
the problem is not income taken by the goverment but money spent by our goverment way out of balance
Weird how the government tries to dictate how we should manage our finances while the government can’t even spend less than they earn and balance a budget isn’t it?! It’s RIDICULOUS!
I used to work at McDonalds, 2 years ago (2009) and I made 7.25 and hour, which is minimum wage, at 40 hours a week I made $1160 BEFORE taxes. I was also in college full time at the time so Im so sorry that I didnt have the time to work 60+ hours a week. So Im not sure why you think working at McD’s would be so great now. As for getting this imaginary great 2nd job? Im sorry, what world do you live in? A second McD’s job? Where are these awesome jobs? I have a college degree and 2 good jobs, still make about $50K/year. As for moving to where the good jobs are…well I dont know if your aware, but moving costs money. Poor people are not typically the most mobile of people, for financial reasons. I would think all of this would be obvious if you had ever been poor, but it sounds like when you worked at mcd’s you probably either lived with your middle or upper class parents or they at least helped you out a good bit.
I don’t call someone making $50K/year poor by any means. What country are you living in, Luxembourg?
Taking a Greyhound bus anywhere in America doesn’t cost more than several hundred bucks. Go where the jobs are, or don’t if you are happy with what you have. It took Americans 3 months to travel cross country hundreds of years ago. What’s several days?
When you’re living paycheck to paycheck “a few hundred bucks” may as well be a million. Plus, you need something for a damage deposit as well as rent, food and other living expenses until you find that dream job. Why don’t you just tell them to eat cake? You have no concept of what it’s like to be poor in America. And that’s the problem.
Do you? I grew up in third world countries for the first 14 years of my life. America is a cake walk compared to living in India for example. What’s your story?
I lived in a third world country (El Salvador) and can safely say that if you have an education and if you come from the right family there is absolutely zero worry to be had. Just throwing out the third-world country moniker doesn’t mean you know what it’s like to be a poor person in a third world. I’m guessing you came from well-to-do parents, F.S. In many ways, it’s a lot easier to live in a poor nation as someone who makes money. My parents were squarely middle class (in the American sense of income earned) and they were able to afford a maid, a beach house, American schooling and other luxuries that they would never be able to afford in the U.S.
Also, the point that lower-income to poor people not having the means to move is factual. Can it be done (moving)? Yes. Is being poor or low-income a huge impediment to mobility? Heck yes!
The Clinton “surplus” was not an actual value that you can hang a hat on. When the budget is a deficit budget and you don’t spend all that you borrowed from the fed, then what you have is a time when you didn’t spend what was budgeted but spent more than you took in with taxes.
And as “Me” pointed out, Clinton raided other funds which most likely has quite a bit of bearing on the circumstances we found our selves in after January 2007 when the Democrats took over the House and Senate, creating the 2008 crash.
My question is, with big government here until 2016, isn’t it logical for people to save LESS given more people at the margin will expect the government to be their savior?
Here’s an article I wrote on 12/4/2012 entitled, “How Much Savings Should I Have Accumulated By Age” for everyone to read. I’ve got charts and everything!
It’s written to be applicable and helpful to 99% of the population.
“Clinton, on the other hand, RAISED taxes (because we NEEDED THE REVENUE) and it was this additional revenue that created the surplus of the ’90′s”
Wrong.
Clinton’s “surplus” came from raiding money from many different money pools that government controls. He in essence took money from one pocket, put it in his other pocket and said “look at all this surplus money my policies created!”
in 2000, Clinton claimed a $230B surplus, but Clinton borrowed
$152.3B from Social Security
$30.9B from Civil Service Retirement Fund
$18.5B from Federal Supplementary Medical insurance Trust Fund
$15.0B from Federal Hospital Insurance Trust Fund
$9.0B from the Federal Unemployment Trust Fund
$8.2B from Military Retirement Fund
$3.8B from Transportation Trust Funds
$1.8B from Employee Life Insurance & Retirement fund
$7.0B from others
Total borrowed from off budget funds $246.5B, meaning that his $230B surplus is actually a $16.5B deficit.
($246.5B borrowed – $230B claimed surplus = $16.5B actual deficit).
If there is ever a true surplus, then the national debt will go down.
Clinton also benefited from the biggest stock market bubble since the 20s, housing price bubble, the deregulation of the banks (credit expansion soared in the 90s), and a Republican congress that forced spending in check including welfare reform. The reason we ran massive deficits in the 80s and 00s is because spending increased by over 6% per year while tax income only went up by 3-4% per year, and of course both parties are to blame (eg Bush with 2 wars/nation building campaigns + Medicare part D). If any business operated like government did it would be bankrupt in no time.
Nice to see the rich are not above ABUSING UNEMPLOYMENT by having no intention of getting a job after engineering their layoff when they’re ready to retire. And they complain about welfare queens.
asking people below the poverty line to pay an additional $43/month in taxes (over payroll taxes) is just plain stupid. They will require a greater amount from social welfare programs to make up the difference, and any “savings” will be lost in the bureaucratic overhead for those programs. Oh but wait you probably think the social safety net is a waste of money. More sage advice: try to hit the soup line twice, you’ll have more energy for that great second job!
Nobody said below the poverty line. Above the poverty line, yes let’s all chip in. Below, best of luck and keep all your money to survive!
But you did, Samurai. The bottom 50% of earners obviously includes those below the poverty line, and you wrote: “All we have to do is make the bottom 50% who pay no taxes pay just $43 a month in taxes and we’d raise $60 billion a year right there!”
Then I’m clarifying now.
I understand why people can’t or don’t want to pay taxes. As a new retiree, I plan to shelter as much income as possible. We must accept big government is here to stay and therefore we must do our best to protect our hard earned income and assets from wasteful government spending.
We “NEEDED THE REVENUE” because we spent more than we collected (for both sides to buy votes). Clinton raised taxes that, in part, caused the recession that W inherited (Clinton even said he “probably raised taxes too much,” pretty honest statement for a politician). The Clinton surpluses were achieved, in part, to the ending of the welfare system and cutting the military, reducing significant spending and forcing people back to private sector work and paying taxes.
Overspending was wrong when Republicans had White House, Congress and Senate for 2 years during Bush’s term. Overspending is still wrong when the Democrats control the WH, Congress and Senate for 2 years during Obama’s tenure. We just don’t hear about it from the Demedia. We threw away $1 trillion with nothing to show for it.
Reagan raised some taxes to compromise with Tip O’Neil and keep the government functional. “Daddy Bush” didn’t initially compromise with Congress and the government shut down. Of the 535 Congress members, 102 Senators and the 1 Republican president, guess who the Demedia blamed?
With the exception of your well supprted JFK tax cuts, I don’t know where you are getting your “facts” from. How can you attribute tax increases, without factoring spending, to the “surplus of the 90’s”?
Address issues, not party. There’s not enough tax revenue available to match our spending. We must cut spending by millions for every dollar of tax increase. We are very near the edge of the cliff. Stop pointing at the various drivers and let’s find the brake pedal and turn the steering wheel.
Some great points here, but the extreme austerity approach seems to be failing world wide. While it is true that reconsolidation can be necessary for any business, there is also a limit on how much and where expenditures can be cut in order to stay in business. While I fully agree that spending more than we make is poor budgeting, any well run business knows that there are other ways to balance the books besides cutting expenses. One reason is growth. Any company that grows must increase spending to meet the needs of the future. This includes incensement in investments, innovation and market positioning. Even in tough time, business must still invested, innovate, and take some risks. Regardless, there are multitudes of ways of increasing revenues in business besides raising your price too.
Governments must also increase spending regularly to meet the needs of the future, yet must also balance their books accordantly by increasing revenues. And just like in business, governments have more options than increasing taxes (the price citizens are charged). From changing trade policies to providing growth incentives, anything that improves market conditions, increases revenues. And just like in business, once revenues are on track, expenditures become justified, but there is always room for improvement.
Personally, I like many Republic ideas of a balanced approach to government programs, such as community service requirements for those who receive government aid or even only bills that are fiscally neutral, yet they seem to focus only on limited areas of the budget (Democrats only on the others). This concept should be applies to all our expenditures and taxes. Understandably, some risks must be taken, such as investing in new technology and innovation; unfortunately, too many of our expenditures show no clear return or even potential return on the investment.
Education and highways are clear and necessary investments with obvious returns on the investment, yet neither will fair well if just blindly funded, so need regular review. On the other; specialized tax loop holes for single entities are even more ambiguous, with little oversight or review. For example, a new highway increases traffic flow and productivity: a necessary investment. These costs are examines and reviewed on a regular basis. On the other hand, grant money to a university to develop a better solar cell is a risk, but with a clear potential return of making our solar industry more competitive. Investments in fledgling industries are also examined and reviewed on a regular basis. Yet, grant to top oil and coal manufacturers, industries well developed and placed in the market, provides a unclear return. A fledgling company receiving a grant will ask what they need to give in return (usually it is just to succeed); while a massive company on a 40 year old grant considers these funds just part of their budget, a government crutch, rather than an incentive to provide a honest return of appreciation for their grant money. Like any government aid program. They can be very helpful, but only in the short term and are never a long term solution.
I support going over every, single, government expenditure on the books and ensuring each is providing an honest return on the investment, but instead of starting at the bottom (Welfare reform, S.S. reform), I would start at the top (Industry/Special Interest grants). What I think Republicans fear the most about a top down approach, (and they are fully justified for doing so), is that we will stop ½ way through the process and not finish what we start. Democrats fear the opposite. Chances are, we’ll just have to start at both ends and work our way to the middle. But regardless, until Americans are once again assured that our government is wisely working to build and develop our nation and not just a select few (top or bottom), confidence will continue to remain at an all time low.
@PunkyAmerica
W’s tax cuts brought in more revenue than ever in the history of the US. Fighting two wars and reckless domestic spending did away with those surpluses not tax cuts.
Comrade,
I am for Socialism for a brighter future. Maybe you misread this post about the the hope for equality. https://www.financialsamurai.com/2011/08/01/socialism-as-a-means-to-a-brighter-future/
Here’s another great article https://www.financialsamurai.com/2012/08/15/working-is-to-capitalism-as-retirement-is-to-socialism/
Sam
Financial Samurai, you my friend, are an idiot. The world has repeatedly proven that socialism does not work, yet you keep pushing the button hoping for your treat. get off your ass and earn what you deserve. If you haven’t earned it, you don’t deserve it!
If Socialism is so bad, why did America vote for bigger and bigger government over the next four years?
Is it not rational to kick back and live the good life if there is a huge safety net? We can take more risks and pursue are dreams as well. Are you saying Americans voted for the wrong candidate?
That’s not true. Socialism is alive and doing well in a number of countries around the world. And in most of those countries the residents enjoy better health, longer lives, better education and an all around better standard of living. Is pure socialism the answer? Of course not, but neither is pure capitalism, because sooner or later, as we’re seeing here in the US, one segment gets all the money and power and we cease being a free market and become an oligopoly. And that shouldn’t be a surprise since we’re living in an oligarchy.
Considering that the out of the top ten nations, all have some form of socialism and all have a healthy standard of living to boot, with Germany doing extremely well. (Average income $88k), and massive social programs to boot (most have free healthcare, free education, free retirement (excluding US…for now)). Although many socialist nations ask their citizens to contribute nearly 50% of their income towards taxes, there are rarely any complaints, due to the stability to their society these programs have provided. Yet in all the developed nations, it is an on going battle.
No form of government is perfect and our forefathers knew perfectly well that our own constitutional system was flawed from the start, which is why the concept of amendments was introduced from the very beginning. They were very scared of us adopting the old English system of few property owners and the consolidation of wealth and power at the top. This was the very purpose of the separation of powers, were no branch of government had total control. Regardless of these checks and balances, they knew that even with their best ideas, the job of defining a more perfect common-wealth would be far from complete, if ever.
Change is normal in our nation and always has been. If we are not able to adapt to the changing world economic, we won’t survive. We have two different directions we can go as we adapt. Either towards the more comprehensive social net programs used by other developed nations to provide a fair living standard(Capitalism/Socialism mix) or towards the 3rd worlds slave labor plutocracy(Capitalism/Oligarchy mix) where the wealthy control all opportunity. Unfortunately, we seem to be leaning towards the later.
And Dtrain…very few earn what they deserve.
Interesting statistics. It is surprising to me how low the average income is in the US. With inflation on the rise, I do not know how people survive with those income rates.
Be very careful when articles quote averages on anything. I believe the average in this article refers to what Americans earn. There are many Americans that earn nothing (retirees, unemployed, disability, etc although they do receive funds) so they drag the average down. I’m willing to bet that if they included only income of working families the average would increase significantly.
I noticed you didn’t figure in payroll like social security tax that is only paid on the first 100K. If you reallyh want fairness and equality in taxing you would also be pushing that everyone pay this on all their income.
Only if social security benefits also increase commensurately.
@Andrew
https://www.thenewamerican.com/reviews/correction-please/760
“Henry Morgenthau, who served as Roosevelt’s treasury secretary, admitted to a congressional committee in May 1939 (as quoted in the recent book New Deal or Raw Deal? by Burton Folsom, Jr.): “We are spending more money than we have ever spent before and it does not work…. We have never made good on our promises…. I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot.””
When Kennedy lowered taxes, revenue went up. When Reagan lowered taxes, revenue skyrocketed. When Bush lowered taxes, the government had record revenues.
Why are some on here of the belief that if we do the opposite, we will get the same result.
Obama even admitted that revenue would shrink if taxes were raised. He said it was just fair.
Just to be clear. Obama is not “asking” the top 1% to pay more. He is proposing that the government take more money from them.
If you were told that any money you made over $200k would be taxed at 100%, would you go out and work your butt off to make 300k? or would you stop at 200k because there was no incentive to make more?
but nobody is taxed at 100% period. if im poor i pay in proportion to my income. if i am poor it is much harder for me to live well at the rate of inflation than if i was rich. the rich’s income increase faster that the poor’s income
The key word there is WHEN. Later they plummeted.
GHW Bush’s increase in taxes, for which he was wrongly excoriated by his right wing party, were responsible for the 1990’s surge. That and artificially low oil costs. Clinton’s reduction was ill considered and responsible for the recession in 2000/2001.
Enjoy
Bush did not artificially lower oil costs, we have oil in this country, We even have reserves for emergencies, such as Sandy, that have not been tapped into. We also have oil in North Dakota that is 20 times the oil that was discoversd at Spindletop and that is only ONE of TWENTY…the only problem is our President. He keeps making laws to make it harder to drill or frack for it. It takes a private citizen at LEAST a YEAR to get a permit to drill on their on land, THEN they have the EPA to fight. Government needs to get out of our business and let us help this country.
America is the only country in the history of man that was formed with a single idea in mind, to protect the citizens rights and the citizens pursuit of happiness. The governments purpose, the governments end, was the citizens…WAS the citizens, it is no longer the citizens. Now the citizens have become a MEANS of government…let me explain.President Obama has a dream of National healthcare, it may be a very compelling idea but his idea of healthcare is not MY dream, and yet, President Obama is usung the force of the Federal Government, the coercive power of the Federal Government to compel, not just me and you, but every single American to FUND his dream, This is NOT the purpose of the American Government.
Lower taxes and tax revenue goes up. History shows and proves itself. Liberal Democrats raise taxes during these prosperous times and blame others for the failures. Insecure people like to drag other people down. Bush gets hammered for 5% unemployment while Obama gets praised for unemployment dropping to 7.9%. History has shown what happens over and over. Too bad people (yes, they are people too) can’t understand that there is a bigger world than what their little eyes can see and comprehend!!!!
If you check the unemployment figures when GWB left office the unemployment rate was much higher than five percent it was closer to eight percent.
then it is truly interesting that Calif for the first time in decades has record surpluses, some 4 billion, because W’s tax cuts expiring next year induced capital rich folks to sell now at a lower gains rate then later.
This assertion that lower taxes drive up tax revenues is dogma. There is no evidence, by economists and econometricians anywhere, that back up that assertion.
It reinforces how powerful tribal gossip is. That Arthur Laffer’s drivel on back of a napkin asserting such economic nonsense gets spewed as facts just because one wishes free lunches were so.
CHUCKSTER, it is only fair that ALL recipients receive equal reward for their contribution. As such, all contributors should pay equally. That is to say, EVERYONE should pay the same tax rate (e.g. 15% income tax for everyone regardless of income).
So what you’re saying is:
If there are 50 million households making $20k/year or less, they should be taxed at the same rate as the 15k or so households making $500k per year, despite the fact that the cost of living between the two is marginally higher?
I’m guessing for that to be viable, the 15k households must buy contribute considerably more to the GDP than the 50 million households in the $20k range, in order to economically equitable within the US. Now on top of it, the 50 million households that have less disposable income are spending less money, while the 15k with the most disposable income are saving more money. That seems like it will do well for the GDP.
Effective tax rates and income tax rates are entirely different things. +/- 5%, everyone has been paying an equal share of their income in taxes for a few decades now.
You need to take into account more than just income taxes – we pay taxes all the time (sales tax, licenses, registration, etc.), and most taxes are regressive in nature and not progressive like federal/(some)state income taxes are. As a function of income, those small taxes hit people with lower incomes to a very high degree in terms of percentage, but hardly register with the more fortunate.
Ok YOU tell US what you think is “fair” for them to pay.
I am curious about this, If Reagan was a conservative and his tax lowering increased revenues so much then how and why did the national debt almost triple during his term?
He also did away with the personal interest deduction which effectively raised taxes on lower income people who cannot afford to pay cash for things like cars…I remember it killed me.
The debt went up in Reagan’s time because the government has a spending problem, pure and simple. The government is a perfect example of a high income couple who are always in debt no matter how much they make. There are a fair number of high income folks out there like that…and that’s what our government is like, too. Getting rid of deductions for consumer debt was a good thing, in my opinion…it discourages people from takine on excessive debt. Of course, the banks found a loophole because it didn’t include home equity loans. I think they should take away the deductibility of home equity loans as well…It will discourage people from using their homes as ATMs.
Several thing:
First, we were in the midst of the cold war, which Reagan won without firing a single shot, by bankrupting our enemy.
Second, he had a Dumbocrap congress that demanded ALL the extra revenue, and MORE, be spent to buy them votes.
Third, You are an uninformed idiot.
And what was the income gap between the executive and the employee in the early 60s and early 80s? Let’s go back to those numbers, too, shall we? See, the problem is, when you’re making $30,000 a year and have 20% taken in taxes, you live on $24,000 a year. When you make $300,000 a year and are taxed at 20%, you have to struggle through life on $240,000 per year. Now do you get it? The well off have been coddled for far too long and the playing field is very much tilted in their direction. And why wouldn’t it be, as they have the money, the power and make the rules. What do you expect from alleged patriotic Americans who had as the “top priority” to make Obama a one term president? Not the economy, not the wars in Iraq and Afghanistan, but a power grab. That tells you all you need to know.
You say this because you’ve made $300,000 before? I hope so, otherwise pontification isn’t credible.
Believe in equality, not discrimination.
Equality is important, but this author describes only income tax, which only accounts for 80% of Federal taxes, let alone state taxes. When ALL taxes are include, the amount of taxes paid by each income group is closely proportionate to their percentage of income.
For example, in 2011, the bottom 20% of earners (Ave. $13k) brought in 3.4% of the income and paid 2.1% of all taxes. The top 1% of earners (Ave. $1.37 mil) brought in 21% of the income and paid 21.6% of all taxes. (Institute on Taxation and Economics Policy Tax Model April 2012)
We all have skin in the game, when you take off the income tax blinders, and consider all taxes.
But you are not accounting for the fact that the lower 20% income earners get over 100% of there taxes they paid throughout the year returned to them in refund and credits so they are not paying their fair share. Just because you paid taxes through the year does not make you a tax payer if it all gets returned to you plus some.
You do not take into account the taxes returned to large corporations and companies as incentives for doing business, nor as subsidies for certain products — not saying that is wrong (Though often it is), just saying there is more to the picture. Or how very large companies, through use of their funds and political connections, get the vast majority of government contracts, meaning a very large percentage of their income comes directly from our taxes. Nor do you take into account that business, all business, is dependent upon infrastructure far more than the average poor American, and hence, are responsible for a much larger share of the costs.
On a side note, the effective tax rate of the top tiers could be lowered by requiring a living wage, insurance included, be paid to all employees. If you can not pay a living wage, pay for healthcare, and do business, then you have no business being in business. No need for higher taxes.
On another side note, the taxation rate is a game. When taxes go down, the wealthy sell of certain assets, driving up revenue. When taxes go up, they buy instead. Don’t mistake increases revenues for anything more than this. And it is only temporary, as has been proven over and over.
I never understood how taking a percentage was fair. Because someone makes more money they somehow use more government services? Right. With our tax system, the wealthy will always be paying for the poor–who instead of being happy about it, always want more. This is exactly how nearly every other democracy that’s existed on this planet has crumbled–look it up. So I have an idea… no taxes. Make everything fee-based… pay for what you use. Roads are paid for by licensing fees, schools by tuition, police by a municipal “rent”. So what about the poor? Well it seems that so many people are concerned about them–I’m sure people would be more willing to help them voluntarily than involuntarily! If things keep going the way they are, anyone making more than $50K a year will be the top 1%–I’d just love to see how they feel about paying nearly 40% of federal taxes! :)
I just wish people didn’t have the power to vote to raise taxes on other people without having to pay more themselves. That to me is robbery, or tyranny. Everybody pitch in, or nobody!
I am honestly baffled about what i’m hearing, but since most of you are in top 25% or higher i guess it only makes sense. Have you made minimum wage recently? There is no way someoen could afford to survive on 250$. And your right people can move up but as a person going to college right now and trying to work its not easy and i was one of the more inteligent ppl in my graduating class. I have no time to study to try and pay my bills i’m normally exhausted, if i had kids i would never be able to finish. This is someoen who breezed through high school, its not easy nor obvious that people can just decide one day to make more money. It’s difficult and often a risk. Most people dont realize college is a risk, if you dont graduate for any reason thats 10’s of thousands of dollars of debt you racked up. The reason why the top %’s should pay more taxes is b/c it wont effect them nearly as deeply, aside from the fact that most Millionares stash away so much money and write off fake charitys so they dont pay as much as they should. You know why it wont effect them as deeply, in case any are curious, they dont live pay check to pay check, 43$ can mean the difference of a week of not eating or one bill not being payed, there goes my credit score. I wasnt raised with money and when i do finish college and i’m making as much as most of you do i will never be so self-centered as to think that everyoen would be better off if the poor make up for what the rich dont want to pay. Btw Mitt Romney is, to put it bluntly, incompetent. The trickle down theory has never worked, tax breaks to the rich only means more money to the rich. Want more jobs, government jobs are far better than any McDonalds have to offer. In case people dont remember the depression it was mass government spending that brought us out of the depression not cutbacks and tax breaks.
When I was poor, I could set aside $43 a month for taxes to help contribute. I’m not suggestion those in poverty pay. I’m suggesting everybody who is above poverty at least contribute something in federal income taxes and we can all be proud of our country and make it stronger!
Your article suggests the bottom 50% should pay $43 per month in taxes. I truly believe this shows how disconnected you are from the bottom 50% of our nation. They don’t have $43 ‘extra’ to send to Uncle Sam.
I’m admittedly in the bottom 50% and for the sake of argument the least educated to comment. But I feel that for one, the source here is biased and has an agenda. “Don’t argue with fools because from a distance you can’t tell who is who.” Everyone should be intelligent enough to understand that. I don’t vote due to the pure ignorance displayed by both sides. Two people (sides) that refuse to appreciate the other’s argument will never find a solution in my poor opinion. “Two heads are better than one.” “United we stand, divided we FALL.” etc…
Also, you can manipulate numbers to prove ANY point you want by being deceptive. Numbers are the greatest manipulation tool. (Taking the Bible out of context comes in second…)
Life is very short and precious and I choose to not spend it arguing over taxes or politics. (very hypocritical post,eh?) Regardless of who is elected or how much tax I pay I will live my life how I see fit and not allow others to dictate me simply because they chose left or right, red or blue, Ford or Chevy, Miller or Bud,etc… Next time, consider posting a comment to a loved one instead of arguing about who’s paying what. If you’re not in that 0.01% , you’re at their mercy anyway. They contribute to both campaigns so they win. You should thank God you’re alive, let alone not in the bottom .01% of a nation with a lower standard of living. :) God Bless
This entire debate is based on a fallacy, which is that your effective Federal income tax rate is the same as your total effective tax rate, taking into account state and local taxes and payroll taxes (Social Security and Medicare). There is a cap on the earned income subject to Social Security taxes, which in 2010 was $106,800. The standard employee SS contribution is 6.2% of that maximum amount (there is no cap on the Medicare tax, which amounts to 1.45% of all earned income). If you leave out SS and Medicare withholding the Federal income tax looks pretty progressive. If you include these, the picture changes dramatically, and you get the following:
Bracket Effective Tax rate
Top 25% 25.0%
Top 10% 23.3%
Top 5% 25.8%
Top 1% 25.4%
Not so progressive after all, is it? And if you are self-employed, as 10% of the workforce is, you get a double whammy: since you are both employer and employee, you have to pay employer’s share of SS and Medicare taxes as well as the employees, for 15.3% in addition to Federal income taxes.
Remember, these are effective, not statutory, tax rates, so they already take into account all the various exemptions, deductions, tax credits, and/or alternative minimum tax payments embedded in the tax code. I won’t go into state income taxes, which tend to allow fewer deductions than the Federal tax, and I will not get into property taxes, sales taxes, gasoline taxes, cigarette and alcohol taxes, etc., all of which are fairly regressive, because poorer people spend a greater share and save less of their income than better-off people.
Someone said that everyone pays 35% to SS That is ridiculous. It is 15% and your employer pays half of that. Why should the rich pay that percentage over all of their income when the benefit ends at $117,000 approx. Someone brought up a woman with no legs and 10 children. I guess that is how she got the ten children. Another thing, medicare is going to go broke under the current plan. Take a look at your pay stub and see what you pay each week. It is a very small amount. One year of bad health in old age would go through every penny you paid in while working. There is one grim reality we all need to face. It is called REALITY. Stop complaining and work harder and more hours, instead of being a parasite who wants a piece of someone elses hard work.
I love the logical contortions you make to try and make these arguments sound reasonable. The US has one of the lowest tax burdens in the industrialized world. WE limit payroll taxes at the top but have a problem with limiting income tax at the bottom. And you ACT like you are making logical arguments.
Warren Buffett estimates his expenditures at less than 500K per year so sales tax is applicable to <1% of his income but the lower brackets are taxed on almost 100%. And of course EVERYBODY should be paying for the SEC because everyone does stock and options trading right?
"Socialism as a form of governance is bad; it kills the soul, dulls the mind, and will ultimately mutate and engulf you in slavery. It is a lethal game of musical chairs.
True and clean capitalism is good; it will drive you to think, grow, respond, and act with all effort to reach a higher place in fairness. Conversely, it can be turned into a evil machine if we allow thieves (like banks and politicians) to warp it and steal from us behind closed doors."
This is absolute nonsense. Idiocy. I heard the exact opposite in the Soviet Union. Neither is correct. Capitalism and Socialism are tools in an economic toolbox.The best run economies use all of their tools but Americans are becoming too dumb. Germany recently has a bond issue at a negative interest rate. And they use a lot more of that "socialist" tool than we do but I guess they just do have the true believers of the capitalist religion. Hallelujah brother, you tell 'em.
Just curious why you and so many against the message of equality use Warren buffet as an example. Does
He represent the common man or even the common rich man? Why use such extreme?
The problem is this doesn’t address the cost-of-living, housing, inflation and minimum wage statistics. The bottom 50% pay less than their mathematical tax% because even paying only 2.7% still leaves them unable to keep up with the current speed of inflation and be able to afford to even live. Still….since the top 1%, roughly 300,000 people pay 38% in taxes and earn literaly 10 times the yearly income as each of the bottom 50% earn, then shouldn’t those bottom ones pay 10X less? like 3.8%? seem better than magically thinking they should earn 10X less but pay only 3X less in taxes? doesnt make sense
It is not equitable that 47% of the country’s population do not pay any income taxes. However, it is unreasonable to infer that the top 5% are unfairly taxed. The point made on payroll taxes is dead on point and that is not factored into the evaluation equation. In addition, to state that investment income should be taxed at a lower rate, or not taxed at all, because of the risk is ludicrous. Individuals who make a substantial portion of their annual income from investments are usually not subjected to the $2000 writeoff limitation – they are invariably operating as a sub chapter corporation or some sort or an LLC, either way they would file schedule C’s for their investment activitiy which does not have that limitation. Thus, investment losses incurred in any given year are taken in full, which in turn allows for the offset of any income reported from other sources – why do you think Romney is up for paying NO income taxes in certain years. I concur that there should be some differential in tax rates, investments versus wages, but such a difference should be reasonable and as income from the former increases, so should the rates. This country has little old ladies, having buried 3 husbands, clipping coupons on tax free bonds to generate 6 – 7 digit income streams and pay no taxes whatsoever. That’s simply not equitable. The tax code needs to be reformed to deliver a more equitable distribution of the country’s tax requirements. Some portion of the lower 50% should be required to pay taxes, as long as it doesn’t throw them into poverty; but many within the top 50% are also walking away with a free lunch. If the Government would only take this problem seriously, we could resolve it but instead they are too busy catering to the Special Interest groups and lobbyists. What a shame.
If 50.00/mo. is so affordable, then why are republicons so against health care reform, in which everyone pays for healthcare at 1% of their income. Everyone pays, everyone is covered. A person making 5000/year pays 50.00/mo. for healthcare. Seems fair. It was actually a republicons idea (Romney) that started in MA. When Obama tried to adapt the same plan for the country conservatives bashed it. Why the hypocrasy?
So according to your math, you worked 40 hours/wk at McD’s and still made 550 a mo? What about Medicare, Social Security, State and Federal tax withheld? How well were you doing after that? And you stated that minimum wage is 3X higher now than it was at 3.50/hour? So do you actually believe our current minimum wage is 10.50/hour? It’s not, it’s 7.25, and would be much less if republicons had their way. And another side job? If your working your butt off at McD’s for 40 hours/week (fast food is hard work, I know I’ve done it too) how do you have the time for another “side job?” And your motto to “never quit,” how many people laid off were quiting. I guess when a guy is two months short of full retirement and gets let go so the company doesn’t have to pay what is owed, thats called quiting in you book. BTW, everyone who works pays federal taxes, based on their salary. Those making poverty level wages (14,000/year for singles) can get their federal tax back when they file taxes. So your 47% don’t pay taxes garbage is just that, total garbage. I’m in the top 25%, but still believe in a tax system based on the more you make the more you should pay, it’s common sense.
What is with the photo of President Obama, the little whit dog (not Bo) and the Lincoln Memorial? Weird.
With great sadness, I confess I did not have the time to read all the posting on this topic. From the several I did read in the beginning, I feel I must comment on the ideology (concerning poverty/wealth + socialism/capitalism) that strikes me as flat-out wrong.
A few points to inform you of my background: I am 56 years old with a 132 IQ (Binet), married with a son, a retired Electromagnetic Spectrum Authority out of NYC (retired when I was 38). I have been all over this ‘scale’ of contention, from earning and buying a $400 Pentax Ashia 35mm SLR camera when I was 14 (back in 1970), to being utterly homeless for 3 years during my 20’s, to later in my late 30’s owning a $2M home on the Intracoastal in South Florida with a 44′ yacht, personal 28′-3″ Superstretch limo, Cadillac STS, deck-out truck, jewlerly, art, etc., to being in financial dire straits as of late. The highest personal AmEx bill I ever racked-up was >$17k (mainly due to a high-end watch purchased); now I must strive to keep it under $3k at all costs. I conduct myself in what I think of as a Christian way, but do not belong to or go to any church; I am an agnostic because God never spoke to me personally. I have traveled across the country visiting about half the states and have been to Europe and the UK. Many millions have been ‘legally’ stolen from me, and Wall Street has ‘lost’ about a million of my money. The IRS one year told me I still owed another $46,000. The factors surrounding this has nothing to do with the point I will raise, other than to inform you I have experienced all the drama associated within the poor/rich scale. Ergo, I have knowledge of the human experience in it’s broad impact concerning psychology.
With that said, I am a conservative, and always have been. A individual’s poverty is not automatically a bad thing; they may not be all that interested in wealth. What is important is how the poverty came to be; was it through stupidity and sloth, or was it for a lack of material want? What is important is how the wealth came to be; was it through intelligence and honest work, or was it via theft and unbridled greed? I can tell you that “money” is nothing but a tool (and yes, it is a great tool to have), but, -it- is not your real purpose in life.
There is nothing inherently wrong or bad with being ‘poor’, just as there is nothing inherently wrong or bad with being ‘rich’.
In either case, and I speak with experience, the state of a persons possessions will not fundamentally change that individuals demeanor, that individuals core values. The only factors that truly, deeply impact the person’s mind are physical pain, poor health, or something stolen from them (material or mental). If you are a SOB or a nice guy when you are poor, you will be the same if you become rich (and vice versa).
In the past, it was the community, particularly the church, that helped the poor (via donations and volunteers), and there were no dead bodies laying around unclaimed on the streets. The only demand is that you must commit to a life of honest diligence and conduct under the spiritual word of God to claim your self-reliance again with these people. It was a helping hand, but it was not required by law. Caring can be very different then supporting (church vs government).
In the present era (40ish years), it is predominately our government that provides assistance (via taxes), but with no mandate to change what brought this on (such as unashamed unwed women with a penchant for churning out more and more babies, or refusal to garner an education favoring gangsterism instead, or an ingrained hatred for those better off), only a time frame to the end of benefits. This is a system of control that slowly, slowly brings on socialism. Socialism’s fastest track to flurishing is to push class warfare, where a majority will always be mentally driven that they are being short-changed. Please remember, our nation was wisely founded on it being a Constitutional Republic (and technically still is); we are not living in a democracy (and never have). They only thing democratic about our form of government is the vote we cast. Being a Constitutional Republic stops the few things cast in stone for a nation of free men from being changed easily (such as at the word of a king), by a whim, by the fancy of the mob in the moment. Of course socialism works very well… until you run out of other people’s money. Socialism has never worked; it has always failed, and it will always fail. It starts with the (false) promise of equality (and nobody can give you that), then drifts to dependance, then to falls into slavery. There will always be those (the people that are the ‘state’) that are outside the norm in the socialism structure; the controllers of the system, the hidden. Remember, they will not live as you and the rest of the people do. Yes, we are all born equal, but, we (as individuals) write our own paths based on the cards we are delt -and- how we play them. Do you honestly believe that through the magic of thought and want that all men will (or should be) 6′-2″ tall? How about blond haired/blue eyed/tanned to perfection/and looks like [fill in the blank]? The examples could go on and on, but the bottom line is there will always be those that are taller/shorter, thinner/fatter, weaker/stronger/, more intelligent/ more illiterate, prettier/uglier, and of course younger and older.
If you are truly frightened to be rich (normally due to a lack of intelligence), verily you will be poor. If you are truly frightened to be poor (normally due to an abundance of emotion), you will make it your mission to be rich at all costs. The question I pose is, is money or lack thereof, the whole proof of our lives? Do we really need to covet what we have not earned ouselves? Don’t confuse the concept of unbridled greed with greed (nothing more than an intense want of something). Do not confuse sympathy and empathy, they are different. I, personally, am unsympathetic to 99.9% of all impoverished people (of todays society); I am empathetic to the other 0.1% when I am convinced (through conversation and conduct) of their unjustified plight, and it is on those rare occasions when I help. When it comes to non-money situations, I’m the guy helping someone push their car off the road and seeing if I can help them with automotive knowledge or a ride to the gas station; I’m the guy knocking the perpetrator on his ass when he assualts a woman.
On the direct subject of federal taxes: The perfect balance to a truly healthy economy (who’s definiton has been basterdized to fool you) is a tax of exactly 10% minus $1 on all individuals (no schemes, no adjustments). This will allow a conservative level of growth, remove all extraneous ‘programs’ to society, returning to a pragmatic level where the bare minimum of federal goverance does not include anything beyond paying for a standing army, collecting taxes from foreign importation, a force of interacting unity for the states, national intercourse with other nations, etc. This mere 10% tax will compel people to respect the material things of use, to create things of durability, to conserve, to only spend what the coffers actually hold.
To the poor: Stand or fall, live or die, on your own, you have chosen your path (with a few exceptions, you are ‘due’ no assistance). Conform, work till you bleed if you wish to change your plight.
To the rich: You better be 100% aboveboard, a beacon to others, honest as the day is long (and if you are not, then you deserve the mob’s anger). Lead, pay it foward (by choice, not tax). Prove to the dullards it actually works, by honest example.
Socialism as a form of governance is bad; it kills the soul, dulls the mind, and will ultimately mutate and engulf you in slavery. It is a lethal game of musical chairs.
True and clean capitalism is good; it will drive you to think, grow, respond, and act with all effort to reach a higher place in fairness. Conversely, it can be turned into a evil machine if we allow thieves (like banks and politicians) to warp it and steal from us behind closed doors.
Thanks for your thoughts. I agree with much of what you say, however, not this:
“To the poor: Stand or fall, live or die, on your own, you have chosen your path (with a few exceptions, you are ‘due’ no assistance). Conform, work till you bleed if you wish to change your plight.
To the rich: You better be 100% aboveboard, a beacon to others, honest as the day is long (and if you are not, then you deserve the mob’s anger). Lead, pay it foward (by choice, not tax). Prove to the dullards it actually works, by honest example.”
If you so happen to be born to a single mother who makes minimum wage, and doesn’t have the time to nurture you, you will be at a big disadvantage to many of your wealthier peers. We need to help level the playing field, invest in our libraries, create safe parks for our kids, and lend this mother and her child a hand.
I believe it is our duty.
Amen to FS re: Driskall’s post. 99.9% of the poor are impoverished through no one’s fault but their own? Come on…I am a superintendent of a school district and let me tell you…..It is not a level playing field, by FAR, starting at a very young age in this country. We have a long way to go as a society in leveling the playing field through education. Driskall has a great story, but is completely out of touch. A shame..
Where I live, Long Island, composed of two counties and 2.5 million people, there are 113 school districts each with a Superintendent and accompaning support staff. Each of those Superintendents makes $200,000 plus. One makes $435,000. Many of the teachers make $100,000 plus. We have some of the highest property taxes in the country. We spend more each year on the schools and the test scores never get higher. We are number 17 in both math and science in the world, yet we spend more per pupil than any other country. Perhaps it is because all our tax dollars do is support the teachers unions, pay the bloated salaries of bureacrats, (113 of them plus staff) and support the Democratic party through the” round and round we go” game they play with the Unions. Our schools are teaching socialism, not math and science, and too many care only for their pension and not the students.
No one form of government works – a totally free market with no regulation will run amuck – we are still reeling from the aftermath of our 2008 crash and burn. Conversely, a socialist platform, which does not allow for creativity and innovation will also fail for the reasons you sited. What we need is a blend, a mix of both idiologies. Enough government oversight, to keep the aggressives from defrauding the population; enough freedom to develop new ideas, be creative and to market those ideas with a degree of freedom. Until we get to that point, we will continue to play the yo yo game – up today, down tomorrow
Also, be advised that there is a significant % of the population that simply CANNOT – not because they are lazy but because they just don’t have what it takes. Richard Driskill brags about his 132 IQ, as if he had something to do with getting it. Where would you be, Richard, if your IQ were 72 or 82. Ponder on that, then think about those poor unfortunates who, through no fault of theirs, have to deal daily with just not being able to GET IT.
These people are also Humans – albeit that many would like to think they are not. They are part of our society and we should treat them with compassion. A truly interactive government cares for these folks, provides a safety net so they can at lease live a reasonably decent life. Anything less, in my mind is unacceptable.
I often wondered how many income redistribution liberals would sign up for that program if it were being offered on a global scale. Considering the average per capita income go ally is $10-11000, almost everybody in this county is a “1%er”. Something to think about and sk you liberal friends.
Australia is known with its complex tax system. At the state level are imposed payroll taxes, stamp duties on land transfers and other transactions, some taxes on land and properties, fire service taxes, etc. At the local level are imposed some taxes on land and properties.
But Australia has socialized healthcare, and good living for low income earners and retirees! You guys OK if all American retirees migrate there? :)
What jumps out is that you wrote an article filled with statistical facts that don’t take reality into account. At all. It’s totally biased instead of informative. I do like the number tho. Thanks for that part.
Tell me how “statistical facts” don’t take reality into account? Huh?
Always fight for equality Mike! It’s the best way to go in the end. Say no to discrimination.
It’s basically this, if you are conservative you are Sith. Selfish, evil and crabby. If you are a liberal you’re about the needs of the many and not the needs of the few. Outside of my political line of thinking however RICPR is correct. The rich ship off the poor to die and condemn them for being freeloaders. Lets start a discussion on another forum about that. Here we’re talking about taxes. Samurai only tells a portion of actual taxes paid, either cause he doesn’t know any better or because he’s really trying to push his point of view on others. Then he argue’s that people who work hard for 40 hours are just freeloading cause they make less then other people that work hard for 40 hours. First of all money isn’t life and once you let money define who you are you’re a lost soul. Money isn’t a friend to you.
You asked what jumps out? The concentration on income without counting ALL taxes. Do I think that the info paints a picture? Sure. It gives the impression that the top earners are getting the shaft. What it doesn’t do is make it simple. It seems to me that everyone that politicizes income tax, do not want to do the simple math for fear that the holes in the argument will be too big. Why not show what the percentage of total US taxable income is made by the upper, middle & lower income earners? Why not talk about how much people that are not taxed are paying in other taxes. News flash….income tax is not the only tax. Now dont’ confuse me for some “liberal”. I can’t stand tree huggers & peaceniks. I just call it like I see it. The info I’m talking about is easily obtained. I’m just tired of hearing that people that do not earn enough to pay income tax are somehow worthless freeloaders. These people pay a tax rate of 12% or more in other taxes. They are also the people that line up to defend the rest of us by joining the military at a higher rate than everybody else. I also was one of those people until I obtained a college education. I’m just shocked at the amount of people that buy into the income tax only argument and give left wing nuts Hell for the whole class warfare thing. This is the same. If you are unwilling to count ALL taxes, show who’s earning the money and the reral tax rate per level of income, all you’re doing is talking politics. This is supposed to be based on economics, not who you vote for.
This author is outrageous. The answer to our deficit is to tax the poor, who should be working harder? I am a business student, about to graduate, and frankly disgusted by the way many people think about the world. Hopefully as young professionals enter the workforce we can begin to clean up the culture. The richest among us are loaded, and expensing their money on the most ridiculous of Items. lets not squeeze the last drops from the bottom 50%, and just pick up the damn tab. I know I am not being elegant, but do you not see the selfish lunacy in this article?
Oliver, as a student, you have no perspective because you are not working and pay no tax. For all we know, your mom and dad are subsidizing your living and tuition. Come back to this article when you start contributing to society.
I’m not advocating taxing the poor. I’m advocating we ALL pitch in for the good of our nation. If that means just $50 a month in taxes when one is making above poverty wages, so be it. It’s better than nothing, and collectively we can all help our country.
Pretty rude Samurai, why don’t you come back after you’ve paid over 300K
in income taxes… perhaps you don’t contribute enough?
While clever, your site’s bias is evident. we, by good fortune, and frankly luck, are solidly in the top 20%, not in the top 10% although that could happen.
Now I grant you, my family has been here a long time. We came as grantees of the Duke of York and Albany after the war with the Dutch. We fought in the Revolution (on both sides btw) and so forth. So, my views may differ.
However, I do not regret one penny I pay in taxes. I pay what my accountant suggests without question – and I do not bother to itemize, there is really no reason to We make good money, I would not trade my place in life with that of one less fortunate if I could avoid doing so. Why would I therefore begrudge paying my fair share (which is not as you suggest something equivalent in percent to what a poor person should pay, but rather as much as is needed by my government? We live well, why shouldn’t I give more? It is the duty of those to whom, “much is given” to give much in return – in money, in service, in life.
I am proud to be an America, I’m “blessed” to be among the fortunate in America, and I begrudge not one thing that I give to my country. Those who do, frankly, should leave.
“I pay what my accountant suggests without question”
Wow, so honorable. You have an accountant, and you’re following the accountant’s advice. Congrats.
The problem we have with this and other similar discourses is that there is no attempt on the part of just about all who are participating in th dialogue, to show even the slightest shred of empathy. We are all so intent on ripping and trearing away at whatever someone else has to say, insofar as it is considered an opposing view. Why can’t we just try to understand the other person’s perspective, make a meaningful comment, if there’s one to be made, without attempting to make “little” of what was said. I applaud you and your accountant for bellying up to the bar. We probably could use more folks like you.
“Grantees” meaning you didn’t really earn your top 20% possition?
I’ve been around a long time in the world of business, professionals and the less fortunate. I don’t recall ever encountering someone as fortunate as you doing it by luck (other than lottery winners). And the same is true for those at the other end of the distribution (other than those who have the bad luck of true disabilities).
Life in general really isn’t about luck. That view most often leads to disaster.
I’m not in the top 1% but I make a decent living. I do believe that everyone, however, deserve health insurance coverage. I do not understand people who think otherwise. It would meant that America’s taking the lead again and it not bowing to corruption and special interests.
Figures may not lie, but liars figure. Where’s the rest of the data?
What data are you looking for?
I love the image of the Godlike Obama holding an adorable puppy in front
of the immortal Abraham Lincoln. Praise God, we are Saved.
Lol, glad you like it! I’m surprised after all these comments, that nobody, well maybe one other, has commented on the picture! Praise Obama! 4 more years, baby!
Your data’s are all not up to date and was full of mistakes, mr Samurai. The top 1% making only 380.000 USD ? Well, Gates, Limbaugh, Zuckerberg, Brad Pitt, Rockefeller etc they make millions or billions per month, not only $ 380.000… Your top 1% is not the top 1%, but below that (maybe top 10%).
I have read somewhere the top 1% consisting of Koch, Buffett, Bank of America owners and directors, and the people I mentioned above, made about 40% of total AMerican people’s income (not including the govt income of course). The number 20% of total Americans income is far too little, and since the reccession which hit the top 5% downwards but doesn’t touch the top 1% will make their (top 1%) income percetile share of the reduced whole-AMerica’s incomes to rise (the total diminished, the top 1% stabile, so their % of the total will rise).
As such a tax of 20% is too little, and see this also : https://www.washingtonpost.com/blogs/ezra-klein/post/our-unequal-tax-system-in-one-html-table/2012/02/22/gIQAFSGFTR_blog.html
“About a quarter of the wealthiest Americans, meanwhile, have a lower average tax rate (17.4 percent) than many of those in making far less money.
What explains the wild variation? Part of it is that some Americans — Mitt Romney is the most famous example — get a sizeable chunk of their income from capital gains, taxed at a lower rate than salaries. There are also a variety of deductions and credits in the tax code that only certain people either can or do take advantage of. In theory, the Alternative Minimum Tax was supposed to even things out, to make sure that higher-income Americans weren’t paying lower taxes. “[B]ut,” the White House report says, “its poor design has caused it to fall primarily on upper-middle-income families from high-tax states, as well as on those with many children.”
Bruce Bartlett comments that the tax code has become misaligned with basic fairness principles: “We can see, then, that the tax system in the United States violates the fundamental principles of income taxation. Those are ‘vertical equity,’ which says that those with upper incomes should pay a higher effective tax rate than those with modest incomes — as far back as Adam Smith, ability to pay has always been a core principle of taxation — and ‘horizontal equity,’ which says that those with roughly the same income ought to pay roughly the same taxes.”
Note : Hmmm ……..?? For readers who don’t know other data’s your defense for the top 1% looks sensible, mr Financial Samurai ? Are your bosses in the top 1%, I think so, or maybe top 5%, of course he (they) want his (their) taxes as low as possible with your help here (plus the tax deductions / tax cuts for COMPANIES below 500 employees, which is not a small company like the republicans would it named, as in Indonesia with such a size the company could be an exporter of say, motorcycles assembling plant, and its owner an exporter; whose tax cuts could be to preserve the owners’ own money shielded as the company’s income)
Dude,
He didn’t mean that everyone in the top 1% makes $380k.
He meant that $380k is the minimum one has to make to get into the top 1%.
So, his data is not full of mistakes.
Boelee, you are RIGHT ON THE MONEY. We are upper middle class and although we had enough legal deductions to pay less, the alternative minimum tax brought our taxes up. I don’t get why Romney doesn’t have alternative minimum tax because I know we paid more than 15%, even though we had the deductions.
Its important to realize that this really is only one side to a very complex and important issue. Income inequality is the most vital issue affecting our economy today and it will continue to be a key issue until the problem is solved. We always hear the old liberal saying “The Rich are getting richer while the Poor are getting poorer”; this isn’t just a saying… Its fact. In fact, since the 1980s we’ve seen the top 1%’s income rise by around 500% while the rest of the nation is in stagnation.
What conservatives fail to realize, is that there is a finite supply of money in an economy at any given time. The argument that the top 1% pay too much is taxes because they already make up 38% of all revenue is actually an argument to the contrary. These guys make so much, that when you tax them at a LOWER tax rate than the rest of us, they STILL account for 38% of the total income tax revenue. It was mentioned above that the bottom 50% should pay an extra $43 a month to help support the economy. That’s absurd. The bottom 50% often have trouble putting food on the table. The bottom 50% have a marginal propensity to consume of 1. If you aren’t familiar with economics that means that for each extra dollar they earn, their consumption increases by $1.00. They are helping the economy by spending all they can spend.
It makes me sick when conservatives call the wealthy “Job Creators”. Wealthy people do not spend enough of their money on real goods and services to “Create” jobs. Consumers create jobs. A guy working at McDonald’s has a job because of the constant line of cars around drive-thru, not some magical flow of money coming from pockets of the wealth. Trust me, if any corporation was not making money they would not be in business. Consumers create jobs from the bottom up. The people who are REALLY out there creating jobs are the people who spend all they can. That’s unfortunately the lower earning individuals. They don’t set on their money. They spend it. If you really want to boost the economy, and put some people to work, send out a one time payment of $10,000 to each American who makes less than $25,000. The short surge in spending that lasts about a year will create jobs, which will in turn boost total consumption as the new employees are now earning money that they were not earning before. I’m not going to get into the Keynesian multiplier, but an investment like this in the economy, would result in tax revenues far greater than the initial investment.
On a final note, did you know that the top 10% of earners control 87% of all financial wealth? Do you really think that 13% of the financial wealth, spread unevenly across 90% of the populous is really enough to sustain growth?
There is such an explosive increase in income rates within the top 1% of earners that the “average” of 380k is so misrepresentative it’s practically a falsehood. (Compare the 99th percentile to the 99.9th or 99.99th percentiles, for example — the income growth curve is nearly exponential).
The rich will always pay “more than their fair share” of taxes because they possess “more than their fair share” of wealth — and the marginal utility (for them) of the nominal amount they pay in taxes is vastly different than the marginal utility of any tax dollars paid by those on the other end of the spectrum.
Payment of FICA taxes is in no way comparable to payment of Income tax. By far the largest portion of FICA is for social security. If you pay into the system, you get some amount of payment out upon retirement. I realize it is not your direct contributions that equate to your retirement payment- but if you don’t pay in- you don’t get $$ out except a bare minimum stipend. So it is good for the ‘poor’ to pay these taxes because they will see a large portion returned to them should they get disabled or when they retire. If someone only had investment income their entire lives, they would not have paid any SS and would get hardly anything upon retirement. The rich are much less likely to rely on Medicare health coverage as well, wheras poor and middle class enroll almost without exception. Again, paying this ‘tax’ results in access to a benefit later in life- so can it really be considered a tax?
So, I’m just finishing up completing my income taxes for 2011.. the only year in which I was supposedly “self-employed” for part of the year (actually a 1099 consultant), which I’m discovering has really screwed me! So I am making substantially less than 1% of what Mitt Romney made in 2011 (he made about 22 million), and yet I am paying over 20% in federal taxes, where he is paying only 15%! And that is what I think is unfair… I get screwed because I was “self-employed”, and he gets a huge tax advantage for having his income in investments. People making over a million should be paying more in taxes…. or at least the same rate I am paying!
Why don’t you just build income from investments then?
Oh yeah, right! Why didn’t I think of that? Reminds me of my 6-year old niece telling me at a race – “next time, if you want to win, just run really fast!!!” Thanks for the advice.
Interesing article but unfortunately you blithely switch between per capita income and AGI per US tax returns and pretend you are making valid comparisons. 75 million of those returns are MFJ (53M) or head of household (22M) returns. This indicates at least a family size of 2 in each return. Since MFJ is about 1/3 of all returns filed- let’s look at a 2 earner household with 2 dependent kids. All the sudden that $114K to get into the top 10% is just 2 spouses earning $57K each, and per capita the household rings in at measly $29K- well below the US per capita.
Unless you have tax return statistics from other countries, it is a non-sensical comparison from what a ‘tax return’ reports in the US and per capita income in another country.
You don’t get screwed because you are self employed- you just pay 15.3% FICA taxes. Every employee pays the same amount- either directly taken from our paycheck, or paid by employer. If the employer did not have to pay that tax it would be cash to me as employee. Employers look at total cost of employment. It’s just that most people are too dumb to realize we’re getting ‘paid’ 7.65% less because our employer is paying that direct to the government as tax.
Ok, now I feel a little bad. Don’t take my criticism to harshly, you probably mean well.
Finally, as far as the ‘getting wealth is easy’ deal, that reaks of B.S. If people were mentally capable of exercising that level of self-cotnrol they would, but we live in a world where reality takes precedent over the happy illusions of people who are priveleged and think that anyone can simply pull themselves up by their bootstraps. People who are from wealthy, prosperous, and educated backgrounds have a lot better quote on quote “work ethic.” There is a reason for that. It is because the way we are raised as children affects the way we act and function. I think it is important that you don’t simply assume that having the ability to work harder and longer means that you are putting in more effort and exercising a grreater drive and will. It is totally possible that for somebody who comes from privilege (I don’t just mean income) it is far easier to put in effort than for someone who does not com from privilege.
There is no doubt the wealthy have a comparative advantage to access in things that allow them to do better tutors. Yet, it doesn’t explain the many wealthy successful people who started poor.
I think that any serious look at people has to acknowledge that we are extraordinarily complex in our responses to circumstances. Whether you were poor and from a bad school or wealthy and from a good school is just cutting broad swaths through what is inherented a far more complex issue. Such common indicators of privilege are only the most simplistic step we’ve taken to understand what really goes on in the human mind, what changes and motivates us, how we grow up and form identity. Their are plenty in which social scientists could confidently determine the source of success of a wealthy, successful person who started poor beyond their poverty. Admittedly, their are plenty of ways which we can’t fully explain. I think that thoughtlessly lumping everything we can’t explain that is working well into free will and work ethic is a big mistake though. It reeks to me of belief in an idea without any evidence.
I serious question whether our work ethic and desire are independent variables from the rest of our psyches and experiences. I say this, quite simply, because I believe in neuroscience, physiology, and biology. I believe that work ethic and desire are products of the constants neural systems active in our brains. As such they result from particular conditions and our not something that we can independently switch on or off as we so choose.
“I remember making $550 a month just working at McDonald’s for $3.50/hour, 20 years ago. With wages 3X higher now, I’d be raking in a nice $$1,650 a month or $20,000 a year! Tack on another side job that pays $1,200 a month and I’m in the Top 50%.”
You say that your working $3.50 an hour for $550 a month. That is 40 hours a week, a full time job. Now your saying you want to add a “side job” that pays $1,200 a month. MORE THAN TWICE YOUR FULL TIME JOB!?!? Alright my friend, you seriously need to return to arithmetic. If that side job was also a $3.50 job, you would have to put in 87 EXTRA hours a week. That is 127 hours A WEEK (interesting, we had a movie called that a few years ago…). In other words, about 18.5 hours a day.
The Longer Story: Let’s add in the fact that you have to travel between where you work and that you are also young and probably don’t have access to reliable transportaiton and say that you have about thirty minutes of travel between jobs and your home and the fact that you probably don’t have your hours perfectly scheduled together (maybe 9-5, and 7 PM to 5:30 AM). So in other words your at work or traveling between the hours of 8:30 AM to 5:30 PM, 6:30 PM and 6 AM. That leaves you 2.5 hours between 6-8:30 AM and an hour between 5:30-6:30 to: 1) sleep, 2) take care of hygiene, 3) prepare for work and such, 4) relax and put your head on straight, 5) take care of family issues, 6) work on taxes and other bureaucratic contingencies, 7) eat and prepare food, 8) shop.
The chance that that lifestyle is humanly feasible is so close to zero I can’t even describe it. Your pants are on fire my friend.
Oh, and I forgot to mention doctors appointments and emergencies. You’d also have to find time for that if you had health care.
The minimum wage is now $10 in California my reading challenged friend.
It’s ok not to be wealthy mate.
Your right, I seem to have missed that part. Props. I suppose in that case, you’d be working a little less than 3/4 of the 40 hours a week (using your $1650 data that you stated). In that case, it is 70 hours a week and ten hours a day plus all the extra challenges forementioned. Your argument may hold water in that case.
That would give an extra 17 hours to our hypothetical per week. Two and a half hours more per day. That could leave him with 5.5 hours rather than 3.5 hours where he isn’t busy traveling to sleep, do chores, and run his life, with all the thing mentioned above. I’m sure it is humanly possible. It just doesn’t sound like an option that is feasible for even your best, hard working, average Joe.
The arguments here really shouldn’t be about whose paying what taxes, it should be about what the people we have elected to our government are doing with those funds. If the governement was running a balanced budget and there was no talk of what they needed to do to fix a non exsistent problem then we all wouldn’t be so interested in what our neighbors are or are not paying.
I’ve seen it from all sides. As a couple with no child for 17 years I resented having only a deduction for myself and my husband when our neighbors with 7 children got all those deductions. But which family was using up more of our resources putting wear and tear on our roads and our system? Then, due to a life altering change I actually had to become part of the population that needed assistance, which I believe serves it’s purpose for a short time for those in need of help to find their way back to being productive, not as a “give me and give me more if I have more children”. Fortunately I was finally blessed with a child, a wonderful life and now 23 years later I have worked my “—” off to be able to say that this year we’re in the 5% and by next year hoepfully the 1%.
I don’t mind paying more taxes because I make more and that is a much better place to be. What I do mind is a government that hasn’t read Dave Ramsey and how to buy and pay for things only when the money is in that envelope and stop using a charge card that doesn’t belong to them but to the people they so terribly represent. And for anyone who complains about any upper %’s not paying their dues I would find it hard to believe that the majority of our high income earners were born into it. So, whether they own a business, run a business, work a physically demanding job or sit at a desk they must have done something to get there and for me that has been years of studying and practicing the art of trading equity options and the fruits of my long hours have paid off so well I am in awe. I also wonder how many people complaining about who pays what taxes, spent a fortune on mega millions tickets last week. We all should be grateful that we live in this great nation but we need to pull together and stop the bleeding if we want it to stay great. Enough said. My wishes for everyone is a prosperous, safe and healthy year.
I can agree to an extent, but the underlying issue is that we’re ALL great big hypocrites; you included. We can only see through our own self-absorbed lens, and that perspective is narrow and weak. America has been on top of the global “heap” for decades, which means we have that much farther to fall when the system buckles under its eroding foundation.
Of course we all dislike the government taking our hard-earned tax dollars and giving it away to seemingly dubious causes. But, we also don’t want to acknowledge the costs of our own addictions.
Take our military for instance. I am sure few Americans would disagree with the notion that the US is presently the lone “superpower” in this world. Sure, but at what cost? We spend more on our military than the rest of the world combined. Do we need 800 bases in 150 countries for “national security” ? How well did that work for the British Colonies, or the Roman Empire, for that matter? How about maintaining roads and infrastructure and air travel safety and border / port security? Who do we look to if a pandemic were to break out in our country?
Reading your post has me detecting a mildly racial tone, describing the baby-making and lottery ticket-buying assertions. I would ask you to consider what this mother of 7 would do without those deductions? Would your community be a better place in any way if she wasn’t afforded assistance? Do you feel you are somehow subsidizing her, or putting food on her table? You have to give up on that mentality, because that is in essence of a complex society.. Like it or not. Be proud that you are a bread-winner, and take comfort that this economically unbalanced system allows you to earn well, and that the great majority of what you do make is yours to spend as you choose.
The numbers don’t add up if u take the time to do the numbers yourself you will see that if your in the bottom 50 well lets say the 78ottom 25 the people who need the most help u pay a8out 5% more then the top 50 people and it shouldn’t be like that did u no there is a person well more then 1person that could pay the whole usa’s debt and still stay in the top 50% makes no sence. God bless america cuz america our shit is all ass backwards…..
Brayden….
Check to be sure you are not “fat fingering” the numbers into your calculator.
The national debt including internal borrowing from the SS fund is in excess of the GDP.
That says if the government confiscated EVERY SINGLE PENNEY that EVERYONE made, it would not cover the debt.
The other thing not captured here is how many of the “bottom” 50% work in jobs where it is easy to not or at least under report their income. I for a fact know that most Cab drivers do not report accurate income totals as most of their receipts are in cash, what about service industry employees? strippers? hookers? drug dealers? pimps? valets?
You guys are idiots when it come to tax distribution. How can you expect the bottom 50% of wage earners to pay an equal share of taxes compared to the top 5 and 1 percent. How would they afford to buy all the things that the top earners want to sell them. You all know that top earners get other benifits that lower income earners do not get. Top wage earners use more tax dollars to supprt their life styles and business. Most of the comments above seem to be from people who do not really know any struggling fammilies. You assume that they are all sitting at home drinking and watching TV. Who can live on $30,000 a year and expect to save money to retire or really own anything. They all will be being supported by our goverment at some time or another unless we invest in our future. That takes taxes. How many of the top 10% went to college using government money? It is often the same. Once I get mine why should I help anyone esle. You parents used goverment money to get where they are. Anyone in the military got tax dollors that we all paid. If you want to lower the deficet, then do real work and get private money out of our government. Once the deck is not stacked the deficit will go down faster than you can imagine.
I used to work at mcdonalds and i sure as hell didnt make 20,000 a year! not even close to 20,000 before taxes, and i worked full time with the occasional overtime. Just saying, I am greatfull I live in america, and that I can complain about having just enough to get by on. alot of the world is worse off.
@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.
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.
Good point! Those who add value gain more reward. I’m curious to read the rebuttals to your argument.
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.
Charles- your are wrong about many things. I’m a “top tier” earner. I did it by putting myself through college, paying my student loans and working many long hours taking care of other people. I didn’t steal money from anyone. My home value plummeted along with lots of other peoples. My staff gets paid well and even gets bonuses a few times a year. When we meet our goals and exceed them, all of our employees get paid more because it means they were all working hard to make it happen. So your argument about “increased margins at the expense of everyone else is BS”.
Your first paragraph is also nonsense as you left out an important piece of the meltdown- millions of people bought homes they could not afford to buy and they knew it! They signed up for adjustable mortgages at low intro rates (which of course was the fault of someone else) and then ran the minute the intro rate was over. They had people making 50k a year buying 600k homes! My lawn guy had 4 homes at one point. His plan was to “flip” them all (like everyone else)….that is a risk he never should have taken. Just because my husband and I do very well, why should we cover people that made bad choices? It’s time people start taking responsibility for their own actions or inaction and quit blaming the government and the evil “toppers”. They should be thankful they are “poor” in this country and not like the real poor in Africa, the middle east or eastern europe.
Obviously you have a horse in this race – and I can hear the rehearsed arguments. Most I actually agree with – but that still doesn’t change the situation. My first paragraph is of course NOT nonsense. Irresponsible financial speculation (by the people trusted as financial stewards) has had a massive negative impact on the economy, as has globalization and the outsourcing of the supply chain. Both of these have led to increasing top tier income disparities. This isn’t some kind of ideological speculation. Its just a fact. I totally agree that individuals at all levels of society irresponsibly took on debt which created artificial demand bubbles that we can still hear popping.
So while I agree that the middle/lower classes are also responsible for their ‘addiction’, we all know that its the pusher that made it happen. Just think of it as an illicit drug. The big financial cartels envisioned financial products that could be easily afforded and consumed by the people, and would make them feel ‘high.’ They authorized production and distribution and raked in the profits. They went to incredible lengths to ‘launder’ the profits by creating esoteric financial instruments that would dilute their risk, and create another market segment of institutional and sovereign buyers for their toxic debts. And the ultimate beauty was that they got gov’ts to cover the bets when things started to unravel.
But the bottom line is someone has to pay back into the system to ‘right the ship’, and since you can’t get blood from a stone, the folks with money need to step up and help fix things. Many citizens are called on to sacrifice their lives. This is a real threat to the country. Fed Debt/Fed Income is 600%. Total US debt/Total income is around 380%.
Don’t hyperbolize and imagine I am proposing that all of your money be confiscated. We should simply return to historic precedent and impose wartime/postwar level taxes as a guideline, and adjust as conditions permit to balance the budget and begin paying down the debt. The cost to you of not doing it will be much greater.
Exactly!!!! Why cover all the bad choices of the businesses the government bailed out???????? Its survival of the fittest. No one should be bailed out. Not big business, not small business, not poor children that had no choice where they were born, or what type of parents they have. Come on people. Yes, I worked 40 hours a week and went to school at night to get a degree. But when I got the degree and the better paying job, I did not give away my heart and sense of charity. We are at a time where we, who worked hard to get where we are now, and those who’s past generations worked hard to get them where they are now; need to look at the big picture, to have pride in our country, and try to fix it. Not blame or be hateful. Yes, it’s not fair. I understand that. But if we can afford to “help” fix it, we should. It’s our country. Not the top 1%’s country. Not the bottom 50%’s country. If you are asking the bottom 50% to give up 43$ a month, then so can I. That means if everyone gave $43 a month it would double the benefit right? So if the bottom 50 has to give up luxuries like meat every night, or an occasional six pack of beer and box of cigarettes , then the top 50 can give up a golf game, or a dinner out? I play golf by the way, and I can give a up a game a month and guess what is actually $68!! That’s more than $43!!! Yay!!!!!
@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.
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.
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.
Have you ever been to the middle east or eastern Europe? Your assessment of the gap between our rich and poor compared to what it was in the past and to other countries is shows your ignorance on the matter.
You are proving his point. Your only argument is that – ‘hey, we aren’t a third world country’ is pretty weak.
Compared to wealthy developed countries (keep in mind that we are the worlds largest economy), we have a radical disparity between rich and poor, and it is getting worse every year.
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.
How about the point of giving welfare recipients pride and a way out? Might be incentivizing.
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 above the poverty line.
I’m so sick of this argument about people that can’t pay even $1 into the IRS pot. SInce we have about 180 million people that file taxes and pay nothing….if they each put in $1 that would be another $180 million! Since we know that won’t happen (even though many of them can afford beer, cigs, a trip to the nail salon, fake hair, nikes or what ever), they could spend time “volunteering” to make up for their inability to pay. They could help clean up their kids school, pick up trash in their neighborhood, clean police cars, or do something to help their own communities. I’m sure you will view that as demeaning or the like…..well I find it demeaning that my husband and I pay so much in taxes and then get battered by people like you that what we pay is never enough.
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.
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!
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.
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.
@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?
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?
Probably best to tax the 47% who don’t pay any Federal Income taxes to pay for the budget deficit, no?
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.
Why don’t you pawn your computer and send the proceeds to the IRS, that could help cover some of the deficit too!
Charles….
The point you are missing is that the top 5% are ALREADY PAYING from 15% to 36%. If you increased the rate on all of them to 50%, it would only bring in an ADDITIONAL $357 Billion. The defecit for 2012 is $1.3 Trillion. By raising the rates for those NOW PAYING between 15% and 36%, up to 50% for all of the top 5% would not cover a third of the deficit.
OK. That’s a fair point to finesse the argument, but its not a rebuttal. The top 5% are probably paying nearer the low end of what you mentioned, meaning there is another 25-35% of that 3 trillion that could be tapped. That is huge. Maybe raise the rates up to 90% for the 1%. Raise the rates on the top 20% or earners as well. The main point is, we can increase taxes to tackle this issue, that those at the top want to pretend is an insurmountable challenge.
Let’s cut spending, and radically raise taxes on the wealthy that while causing no harm, would resolve the fiscal crisis.
We can do this.
Then, once we are actually paying our way, we use our democratic leverage to really prioritize spending. Deficit spending should be for catastrophic emergencies or sometimes structural investments. It should never ever ever be used to pay ongoing expenses.
Second: Taxation is the most effective form of social engineering. Texas is the benefactor of California’s confiscatory rates.
Costa Rica boasts that more than 30% of it’s population consists of of wealthy citizens from US, Europe, and Japan. Costa Rica, Brazil, and other SA countries realize that the wealth of the counrty depends on the wealth of it’s people.
If you hate rich folks, just raise their taxe rates to 90% and they will be gone overnight.
Well I’m not sure what you propose as an alternative. We need to actually pay for what we spend. If you look at historic tax rates – especially during and after times of war, they are much closer to what I am proposing. Yet somehow you call this hate?!? Maybe it is just that you are ridiculously greedy and selfish and hate your country? Think about it. People sacrifice their lives for this country but when it comes to paying what is perfectly normal and logical tax rates given the fiscal context and historical precedent, you cry foul and threaten to leave? This is the perfect picture of panicked greed from ill gotten wealth.
The wealthy would be paying a smaller amount relatively if they hadn’t participated in the insidious looting and pillaging of the middle class. They are being asked to pay more now because its necessary, and by their design they are the only ones making much of anything beyond subsistence these days. The numbers are clear enough.
I’m not sure why you are assuming anyone hates the rich. The country needs money and they have it all. Let’s balance the budget by increasing taxes to historical wartime/postwar norms, and right the fiscal ship that under their stewardship was driven into the rocks (while their wealth increased).
The 1950’s was a different era. This is a global economy, and global economics abhors confiscatory taxes and massive regulations.
Ask yourself – if your state charged $50,000/year for auto tags, how many people would own cars in your state? Better yet, how many people would move to another state?
I’m sure you will never understand the economics of the fair market. So I won’t even try. Your answer will always be 100% “tax the wealthy”, when it should be at least 80% “cut the rediculous spending”.
FYI: I spent 15 months in Viet Nam, and 22 months in the Naval Medical at Bethesda, MD.
“global economics abhors confiscatory taxes and massive regulations”
You speak in cliches and generalities. Taxes are higher in other developed countries. And fewer regulations? Perhaps you have never lived or worked abroad, and you read that somewhere on the internet? Its almost funny to hear the ‘we need fewer regulations’ mantra after the financial collapse. We definitely need more and better regulations.
Moving to a 3rd world country is not quite the same as moving from NY to NH.
Don’t worry. I’m sure you will do fine. If you really think the business, social, and political climate in central america is better – then no one will stop you.
@ cnile – so now its a ‘fair’ market and not a ‘free’ market? I totally agree that we need to limit and reduce spending as a big part of the solution. But you seem like someone who is all about repeating tired cliches and ideologies. We do not live in a free market. We do not live in a fair market. It is skewed. Money buys politicians. Politicians spend literally trillions to bail out failed ‘free and fair market’ ventures. Poor regulations allow for clever people to game the system and rake in massive short term gains that are beyond absurd, while at the same time destroying the system that made them wealthy. It is slash and burn business. And they have no accountability. In a truly free and fair system, their heads would roll – literally.
I’m not saying its the worst system or even a bad system, but it could certainly use huge improvements. Taxing people at levels to match their spending is so obvious I can’t believe its even being debated. The only people you can really tax to solve the problem are the ones with money – preferably money that isn’t required for basic food and shelter. I agree even low income people should pay some symbolic amount. Once we are paying for what we buy, then some market mechanisms will come into play and we will prioritize spending.
Right now tax cuts for the rich are being financed by future generations. Is that free and fair lol???
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!!!
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.
Why should we have to pay more so those who pay nothing can continue to do so? People like you are a major problem in this country. When is enough enough? Your quick to want to take money from me and my family, why don’t you financially cover the people who pay nothing? My husband and I paid over 140k to the IRS last year. How much more is our fair share? Your thought process is dangerous.
@ Melanie – I couldn’t agree with you more. I can’t stand these people who say, “Just give us X amount more money from your pocket, it won’t hurt you!” Why should we give even MORE than we already pay? They sound like lazy, uneducated beggars… and surely, even if given their precious entitlement, they would in time, simply go back to being lazy beggars. It’s human nature.
Imagine a world where the welfare system is funded by donation only, instead of forced upon us by taxes… Let’s see how many liberal minded people are also liberal with their wallets? Hypocrites.
Scenario: A classroom where all the kids are given chocolate coins everytime they do a good deed like clean the whiteboard or help a friend, and every hour they save their coin they get another coin; but if a child bullies another child for more coins the bully will be punished and have his coin taken away…
The kids that eat their coins immediately or try to bully other kids will eventually have none. Is if fair to force all the kids who saved up their coins patiently and did good deeds, to give half their coins to the kid who has none, simply because “they have more coins”?
And if the kid who didn’t save his coins and ate it from the beginning, got half of all the coins, he’d probably just tell himself, “Why should I have to be good and save, when all the other kids who have chocolate coins will end up having to hand it to me in the end?”
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.
Also, wouldn’t it be nice to tie the ability to vote only if you paid something in taxes?
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?)
YES! I think if you have no skin in the game you get no vote. People forget the lessons of our parents and grandparents- you are more likely to cherish and care for something that you paid for yourself or created yourself vs something given to you. Prime example: look at schools in poor neighborhoods; they are covered in graffiti, kids destroy books, treat staff horribly, and don’t bother to show up. If their parents actually had to pay for it, the schools would be in much better shape and so would the staff!
@Melanie – your idea that “if you have no skin in the game you get no vote” makes no sense at all. Look at Romney – he paid a 15% effective tax rate on his income of $20million or however much it was, compared to people making much less paying 25% or more. But you can’t fault Romney for that.. that’s all he was legally required to pay. By the same token, if someone is making so little that they are not required to pay taxes, how can you take away their right to vote? You’ll find in that category, elderly people who have paid taxes all their lives, as well as many who fought in the military for your freedom… and because they now are on a fixed income and pay no taxes, you would take away thier right to vote? Or someone who has worked and paid taxes for years but has recently been laid off and is surviving on unemployment. You would take away thier right to vote? Really???
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
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!!
If I buy a property with a $100,000 to 200,000 us. value, how much taxes will I pay?
Thank you kindly.
It depends where you buy the property and if it’s your primary residence or an investment property.