Tony Coyle | October 11, 2010
My neighbor, B, is a progressive republican and a tax partner in a large CPA firm. We had a conversation…
“Obama needs to go”, said B.
Why? He’s doing pretty well considering the mess he inherited!
“Because all he wants to do is raise taxes! If we don’t get control [of congress and senate] my taxes will go up by almost 20%. I already pay almost half my income in taxes: income, property, FICA and the rest”
What? How do you get a 20% increase?
“FICA – is capped at about 100k. As a partner, I pay FICA at 15%. Lose that cap and my taxes go up immediately by 15%. The top rate of income tax is set to climb to 39%, which is an extra 3%. And there are a bunch of others, too”
No — that’s just wrong. Even assuming that happens… an example, if you earned $200k your effective FICA rate would be 7.5% on that $200k, right? So even without a cap, your effective FICA rate will never be greater than 15%. If you earn $200k, that means an increase of 7.5%, not 15%!
“OK! But that wouldn’t be a 7.5% increase if I earned 300k or 400k or 500k. It would be much greater than 7.5%”
B, Sure it would, but if you earn $500k and can’t absorb that kind of increase, I’d advise you to start looking for a new tax accountant! LOL
“Well ok! But do you think it’s fair that 60% of the people in this country don’t pay any taxes?”
Where did you get that number? Do you think it’s right that the US has such a large population of poor people they fall under the threshold for federal taxes?
“Most of those people aren’t poor!”
But all of them pay taxes. You included property taxes in your 50%. I assume you included sales taxes, 7% for most everything here in GA? Then those people who pay nothing are paying way more in effective taxes than you – for food and energy and shelter.
This is the kind of misinformation that the GOP promulgates. The Federal Insurance Contributions Act (FICA) tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare.
For 2008, the employee's share of the Social Security portion of the tax is 6.2% of gross compensation up to a limit of $102,000 of compensation (resulting in a maximum of $6,324.00 in tax). The employer provides a matching 6.2 per cent.
For 2009 and 2010, the employee's share is 6.2% of gross compensation up to a limit of $106,800 of compensation (resulting in a maximum Social Security tax of $6,621.60).This limit, known as the Social Security Wage Base, goes up each year based on average national wages. The employee's share of the Medicare portion is 1.45% of wages, with no limit on the amount of wage subject to the Medicare tax.
Because of the cap on Social Security, this part of the tax is regressive and has little effect on the most affluent Americans. When Republicans take the presidency, they often refuse to raise the cap because the tax is starting to effect upper income Americans. Keep in mind this tax has primarily been borne by the middle class since Social Security was instituted in the 1930s.
Income inequality grew through the 1980s, slackened briefly at the end of the 1990s, and then resumed with vigor in the aughts.
Princeton economist and New York Times columnist Paul Krugman labeled the post-1979 epoch the "Great Divergence."It's generally understood that we live in a time of growing income inequality, but "the ordinary person is not really aware of how big it is," said Krugman.
The affluent have made huge gains in income and even bigger gains in wealth since the Reagan era, while middle class wages have stagnated.
Accordingly, more of the burden for Social Security needs to be shifted to the affluent. Keep in mind too that only about one in five Americans enters into retirement with a pension. Social Security is essential to senior citizens.
The GOP suggests that the only tax is federal income tax. Americans pay more in municipal taxes and sales tax than they do in income tax. These taxes too are flat and regressive.
The GOP finds federal income tax distasteful because it is progressive and the wealthy pay a higher tax rate than the middle class. The progressive tax system was instituted by Theodore Roosevelt, a Republican.
The federal tax rate for top tier Americans in the 1950s was 90 per cent. The income tax today for top earning Americans is now 35 per cent and George W. Bush also suspended the Estate Tax which primarily affected the 5,000 wealthiest families.
Tony Coyle, the writer, is correct. All Americans pay taxes and municipal and sales taxes take a bigger effect on the middle class than they do the most affluent Americans.
Why? Because municipal and sales taxes are flat and regressive.
B was wrong that 60 per cent of Americans don't pay taxes. He is probably thinking about the nearly 40 per cent of Americans who don't pay federal income tax.
Politifact noted he top 5 percent of all payers do pay more than half the income tax. They pay about 59.2 percent of all individual income tax, according to an analysis by the Tax Policy Center, a nonpartisan institute run jointly by the Urban Institute and the Brookings Institution.
The U.S. income tax system is progressive, which means that rates increase as income increases. Since the top 10 per cent of wage earners in the US take in half the income, the 5 per cent who pay half of the taxes is reasonable.
In addition 40 percent of Americans pay no income tax. This claim is supported by the Tax Foundation, a nonpartisan tax research group that promotes transparency in the tax code and economic growth.
There's a small caveat to the 40 percent number — it includes nonfilers, typically taxpayers who don't have to file returns because their incomes are too low.
This may be small number, because people with low incomes have an economic incentive to file a return and get a refund. But not all non-filers have low incomes
Many of the fisherman along the Gulf Coast were not able to get assistance from BP during the Gulf Oil Spill because they operated cash only businesses and did have any 1040s or W2 forms. Many of the fisherman were making $70K a year or more before the spill and had never paid any income of FICA payroll tax.
Rightardia believes the non-filers are minimally about 6-7 per cent of the population because that is the per cent that file for Social Security benefits without meeting the requirement for 40 quarters of Social Security payments. Most of these tax scofflaws will end up on welfare in their senior years because they never paid FICA payroll tax and aren't eligible for standard Social Security benefits or Medicare Part A (hospitalization).
In addition, Rush Limbaugh loves to harp about those 40 per cent who don't pay taxes but the vast majority of these folks are Red Staters. These are the recipient states who receive more in federal revenues than they pay into the federal government. This is what happens in conservative states that are known for low wages, union busting and right to work laws.
Most to the Blue States are the donor states who pay more federal income tax than the state receives back in benefits. The top 10 recipient or subsidized states , in order, are: New Mexico, Alaska, West Virginia, Mississippi, North Dakota, Alabama, Virginia, Hawaii, Montana, and South Dakota. For those counting, that's nine "red" states out of 10.
The bottom line: Don't let the right wing bull shit you about taxes. The rich have already have sweet tax deal in the US.
source: http://dangerousintersection.org/, Wikipedia and http://www.slate.com/id/2266025/entry/2266026
Subscribe to the Rightardia feed: feeds.feedburner.com/blogspot/IGiu
My neighbor, B, is a progressive republican and a tax partner in a large CPA firm. We had a conversation…
“Obama needs to go”, said B.
Why? He’s doing pretty well considering the mess he inherited!
“Because all he wants to do is raise taxes! If we don’t get control [of congress and senate] my taxes will go up by almost 20%. I already pay almost half my income in taxes: income, property, FICA and the rest”
What? How do you get a 20% increase?
“FICA – is capped at about 100k. As a partner, I pay FICA at 15%. Lose that cap and my taxes go up immediately by 15%. The top rate of income tax is set to climb to 39%, which is an extra 3%. And there are a bunch of others, too”
No — that’s just wrong. Even assuming that happens… an example, if you earned $200k your effective FICA rate would be 7.5% on that $200k, right? So even without a cap, your effective FICA rate will never be greater than 15%. If you earn $200k, that means an increase of 7.5%, not 15%!
“OK! But that wouldn’t be a 7.5% increase if I earned 300k or 400k or 500k. It would be much greater than 7.5%”
B, Sure it would, but if you earn $500k and can’t absorb that kind of increase, I’d advise you to start looking for a new tax accountant! LOL
“Well ok! But do you think it’s fair that 60% of the people in this country don’t pay any taxes?”
Where did you get that number? Do you think it’s right that the US has such a large population of poor people they fall under the threshold for federal taxes?
“Most of those people aren’t poor!”
But all of them pay taxes. You included property taxes in your 50%. I assume you included sales taxes, 7% for most everything here in GA? Then those people who pay nothing are paying way more in effective taxes than you – for food and energy and shelter.
This is the kind of misinformation that the GOP promulgates. The Federal Insurance Contributions Act (FICA) tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare.
For 2008, the employee's share of the Social Security portion of the tax is 6.2% of gross compensation up to a limit of $102,000 of compensation (resulting in a maximum of $6,324.00 in tax). The employer provides a matching 6.2 per cent.
For 2009 and 2010, the employee's share is 6.2% of gross compensation up to a limit of $106,800 of compensation (resulting in a maximum Social Security tax of $6,621.60).This limit, known as the Social Security Wage Base, goes up each year based on average national wages. The employee's share of the Medicare portion is 1.45% of wages, with no limit on the amount of wage subject to the Medicare tax.
Because of the cap on Social Security, this part of the tax is regressive and has little effect on the most affluent Americans. When Republicans take the presidency, they often refuse to raise the cap because the tax is starting to effect upper income Americans. Keep in mind this tax has primarily been borne by the middle class since Social Security was instituted in the 1930s.
The tax does need to be reformed. If Social Security was levied on 100 per cent of all Americans income, the payroll tax percentage could be reduced. This would shift more of the burden of the tax to more affluent Americans. Today the top 10 per cent of Americans earn nearly 50 per cent o the income.
Income inequality grew through the 1980s, slackened briefly at the end of the 1990s, and then resumed with vigor in the aughts.
Princeton economist and New York Times columnist Paul Krugman labeled the post-1979 epoch the "Great Divergence."It's generally understood that we live in a time of growing income inequality, but "the ordinary person is not really aware of how big it is," said Krugman.
The affluent have made huge gains in income and even bigger gains in wealth since the Reagan era, while middle class wages have stagnated.
Accordingly, more of the burden for Social Security needs to be shifted to the affluent. Keep in mind too that only about one in five Americans enters into retirement with a pension. Social Security is essential to senior citizens.
The GOP suggests that the only tax is federal income tax. Americans pay more in municipal taxes and sales tax than they do in income tax. These taxes too are flat and regressive.
The GOP finds federal income tax distasteful because it is progressive and the wealthy pay a higher tax rate than the middle class. The progressive tax system was instituted by Theodore Roosevelt, a Republican.
The federal tax rate for top tier Americans in the 1950s was 90 per cent. The income tax today for top earning Americans is now 35 per cent and George W. Bush also suspended the Estate Tax which primarily affected the 5,000 wealthiest families.
Tony Coyle, the writer, is correct. All Americans pay taxes and municipal and sales taxes take a bigger effect on the middle class than they do the most affluent Americans.
Why? Because municipal and sales taxes are flat and regressive.
B was wrong that 60 per cent of Americans don't pay taxes. He is probably thinking about the nearly 40 per cent of Americans who don't pay federal income tax.
Politifact noted he top 5 percent of all payers do pay more than half the income tax. They pay about 59.2 percent of all individual income tax, according to an analysis by the Tax Policy Center, a nonpartisan institute run jointly by the Urban Institute and the Brookings Institution.
The U.S. income tax system is progressive, which means that rates increase as income increases. Since the top 10 per cent of wage earners in the US take in half the income, the 5 per cent who pay half of the taxes is reasonable.
In addition 40 percent of Americans pay no income tax. This claim is supported by the Tax Foundation, a nonpartisan tax research group that promotes transparency in the tax code and economic growth.
There's a small caveat to the 40 percent number — it includes nonfilers, typically taxpayers who don't have to file returns because their incomes are too low.
This may be small number, because people with low incomes have an economic incentive to file a return and get a refund. But not all non-filers have low incomes
Many of the fisherman along the Gulf Coast were not able to get assistance from BP during the Gulf Oil Spill because they operated cash only businesses and did have any 1040s or W2 forms. Many of the fisherman were making $70K a year or more before the spill and had never paid any income of FICA payroll tax.
Rightardia believes the non-filers are minimally about 6-7 per cent of the population because that is the per cent that file for Social Security benefits without meeting the requirement for 40 quarters of Social Security payments. Most of these tax scofflaws will end up on welfare in their senior years because they never paid FICA payroll tax and aren't eligible for standard Social Security benefits or Medicare Part A (hospitalization).
In addition, Rush Limbaugh loves to harp about those 40 per cent who don't pay taxes but the vast majority of these folks are Red Staters. These are the recipient states who receive more in federal revenues than they pay into the federal government. This is what happens in conservative states that are known for low wages, union busting and right to work laws.
The bottom line: Don't let the right wing bull shit you about taxes. The rich have already have sweet tax deal in the US.
source: http://dangerousintersection.org/, Wikipedia and http://www.slate.com/id/2266025/entry/2266026
Subscribe to the Rightardia feed: feeds.feedburner.com/blogspot/IGiu
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