The likely answer is no, you don’t pay as much as Romney, even with his 15% rate (to compare to Romney, you’ll need to calculate your effective tax rate, which is your actual tax divided by your gross salary). Sure, you and I have to worry about multiple tax brackets at 10%, 15%, 25%, 28%, 33%, and 35%, so naturally we’re paying more, right? Because each tax bracket is a marginal rate, we’re only paying the top tax rate on a fraction of our income.
For example, if you are single and earned $35,000 in 2011, you’ll first subtract the $5,800 standard deduction, then pay 10% of the first $8,500 and 15% on the remaining $20,700. In the end, you’ll pay $3,959 in taxes for an effective tax rate of 11.3% (IRS source). Romney has a 33% higher effective tax rate than you do, which is pretty progressive.".......................................................................................................Interesting, no? I mean, at the very least Mr. Obama is oversimplifying the matter (that, and hopefully he's not being disingenuous). Now, does this change my mind on the issue? No, no it doesn't. I'm still in favor of doing away with the special consideration for capital gains. In fact, my proposal is significantly bolder than the President's. This, in that I would do away with the exemption completely. The deficit, people, is much too massive and Mr. Obama's so-called millionaire's surcharge would only close the budget shortfall by 30-40 billion a year (this, according to CNN's Erin Burnett). It's a pittance and we clearly need to raise more revenue. Unfortunately here, the President is playing election year politics and implying that this problem of ours will somehow be painless (yes, the Republicans are doing it, too). So much for that whole "Obama is a new type of politician" mumbo-humbo.
40 comments:
Numbers are interesting things. With the correct choice, they can often be made to illustrate whatever point you are trying to make.
For example, in this post you are trying to say that maybe a 15% rate is not so low, and you use one example of someone with a taxable income of $29,200.
First of all, Buffett's secretary probably has a much higher taxable income than that. After all, she is a vert high level secretary.
Secondly, let's actually look at your source reference and calculate some actual effective tax rates. Here they are:
30,000 income 4079 taxes. 13.6% effective tax rate
40,000 income. 6131 taxes. 15.3% effective tax rate
50,000 income. 8631 taxes. 17.2% effective tax rate
And the effective tax rate continues to go up as taxable income goes up.
So, as you can see the break even point with Buffett is about $30,000 to $40,000 of taxable income and if you have anything above that then you are paying a higher tax rate than he is.
Good catch Jerry. Obviously Heathen Republican was attempting to pull the wool over his readers eyes. Obviously it worked with Will. It's becoming more and more apparent that Will really digs "brilliant" Republican lies.
Here's the example that HR gave; "For example, if you are single and earned $35,000 in 2011, you’ll first subtract the $5,800 standard deduction, then pay 10% of the first $8,500 and 15% on the remaining $20,700. In the end, you’ll pay $3,959 in taxes for an effective tax rate of 11.3%"......Are you saying, Jerry, that these numbers aren't correct; that the standard deduction is NOT $5,800, that the first $8,500 is NOT taxed at 10%, that the remaining $20,700 is NOT taxed at 15%?......It doesn't look like you included the standard deduction into the math. That would significantly reduce the "effective tax rate".............And I'm not saying that the 15% doesn't need to go up. As I've stated many times, I want the special consideration for cap gains to be eliminated (possibly indexed for inflation). I'm just saying that Mr. Obama is being a little "creative" here.......And as for Mr. Buffet's secretary making more than $35,000, that may be true. But then she's probably itemizing and, because of that, the disparity probably isn't as massive as Mr. Obama is allegiing here, either.
Way to add absolutely nothing to the discussion, wd.
Will: ...the disparity probably isn't as massive as Mr. Obama is allegiing here, either.
Buffet is "alleging" it, not Obama. Looks like Will is calling Buffet a liar. No surpirse, as he seems to be throwing out the "L" word quite often these days.
WD said: "Buffet is "alleging" it, not Obama. Looks like Will is calling Buffet a liar."
Probably. Will is no friend of the rich, after all...
I would love to see guys like Buffett pay more in taxes and my proposal does just that. My issue here (and perhaps this is a little too nuanced for you) is with the rhetoric that Mr. Obama and others are throwing around. As HR has clearly pointed out, the effective tax rate that Romney pays is already 33% higher than the single person making $35,000 a year (more than that if the person is a single mother). Obama needs to get off of this whole "the rich aren't paying their fair share" nastiness and stop talking down to the American people. As I've pointed out before, wd, we could tax everything over $250,000 a year at 100% and we'd STILL have a deficit (not to mention an even shittier economy). For Obama to imply that we can get out of this mess with only the rich people sacrificing is a lie. I am very disappointed in the President.
Hey, dmarks, maybe Buffett could start by paying off what he and his company, Berkshire Hathaway, already owe. That would be my plain advice to him.
Will: Obama needs to get off of this whole "the rich aren't paying their fair share" nastiness and stop talking down to the American people.
My guess is that you are in a tiny tiny minority. I certainly do not feel talked down to. I'm in agreement. The rich really do need to start paying their fair share.
Will: As I've pointed out before, wd, we could tax everything over $250,000 a year at 100% and we'd STILL have a deficit.
What you're failing to take into account is the fact that the economy would improve if we raised taxes on high wage earners. Then everyone would be making more and everyone would be paying more. The deficit could be erased over a number of years.
This whole "taxing 100 percent" business is a Conservative red herring.
No, I am not saying that HR's numbers are wrong. I agree with them. The difference between what you wrote and what I wrote is that my numbers are based on taxable income and taken directly from the IRS tax tables you referenced. In HR's case, the taxable income is $29,200 (35,000-5,800), and the tax is $3959 which is 13.6% based on taxable income.
We don't have Buffett's tax returns so we don't know if his 15% figure is based on gross or taxable income.
We do have Romney's 2010 tax return. He paid 3 million in federal income tax on 21.6 gross income and 17.1 million taxable income for a rate of 13.9% and 17.5% respectively, about the same as a taxable income of $50,000.
wd, what part of "I'm in favor of the top rates going back to 39.6%" don't you understand? We need to raise revenues (at first on the rich but eventually on everybody) - definitely. But Obama (lately anyway) is trying to make it sound like we can solve this fiscal mess simply by taxing the rich. It's bullshit. The ONLY way that we can solve this deficit mess is if we a) raise revenues, b) cut spending, and c) bend the cost curve on entitlements. Every other way is simply smoke and mirrors. John F. Kennedy said, "Ask not what your country can do for you, ask what you can do for your country." Obama (not nearly to the degree that you are, granted) is saying, "Hey, let's tax the rich. Yeah, that's the ticket." That's a big, fat, hairy difference, wd.............And there's a humongous difference between what Clinton did in 1993 and what Wilson, Hoover, and FDR did. Clinton slightly raised taxes and coupled it with budget cuts. The other 3 clowns drastically raised taxes and drowned us in a sea of debt. Thankfully, the engine of the American economy is strong and can withstand such lousy economic Presidents as Wilson, Hoover, FDR, Nixon, Bush 2, and Obama (?).
In the SOTU, Obama said,
"When it comes to the deficit, we’ve already agreed to more than $2 trillion in cuts and savings. But we need to do more, and that means making choices."
and
"As I told the Speaker this summer, I’m prepared to make more reforms that rein in the long-term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors."
That doesn't sound like he is saying "we can solve this fiscal mess simply by taxing the rich", although it needs to be part of it, as you agree.
Jerry, it's not clear to me how you calculated the effective tax rates of 30k, 40k, and 50k. I can say that the effective tax rate on $50,000 in income is definitely NOT 17.2%. In fact, for a married individual, s/he needs to earn more than $106,000 per year to pay an effective tax rate of 15%.
Here's the link to the full post. The median income -- where half the people pay more and half pay less -- of $50,221 only has an effective tax rate of 9.9% (married). So more than half of Americans pay less than Romney's 15%.
The effective tax rate does continue to go up, but it doesn't cross the 15% threshold until $106k.
This can be lowered if people include other deductions like charitable giving and home mortgage interest, but the straight numbers accounting for the standard deduction and the 2011 tax tables put the level at $106k for filing jointly.
First of all, I am calculating the effective tax rate based on taxable income, not gross income, so we don't have to worry about deductions, etc.
Here is how I calculated it. First I went to the IRS source referenced in this post. It is the federal tax tables for 2011.
Then I went to the tax for $50,000 of taxable income. The tax for a single person with a taxable income between 50,000 and 50,050 is 8631.
8631 is 17.2% of 50,000.
I used a single person because that is what Will used in his (or yours) example.
Jerry, you're right. Mr. Obama at times HAS said that he was willing to deliver on budget cuts and I'm willing to concede that the Republicans haven't always been constructive. But he's also been short on specifics and periodically divisive himself. Me, I would have preferred that he more seriously considered the recommendations of his own debt commission and taken it from there. But, hey, what do I know, I'm a person who neither party seems all that interested in of late.
Well then you're the one making the numbers fit the story you want to tell. Effective tax rate is calculated against gross income, not income after deductions.
If you want an apples to apples comparison, you should also recalculate Romney's effective rate after subtracting all of his charitable giving. Also, you need to used the married rate since Romney is married.
Definition of 'Effective Tax Rate'
The rate a taxpayer would be taxed at if taxing was done at a constant rate, instead of progressively.
Calculated as total tax paid divided by taxable income.
That's right, Jerry, "taxable income" not "adjusted gross income" (or AGI) which you used from the tax tables. So your calculations are wrong.
Come on, Heathen! Did you even look at the tax table?!? Let me read it to you,
"If line 43 (taxable income)is --"
Do you really just make this stuff up? Even in your previous comment you said, "Effective tax rate is calculated against gross income..."
You truly are a republican!
I'm not the one playing dumb here, Jerry. Taxable income is the same as gross income for most people, unless you have non-taxable income or tax-deferred income.
Everyone here has filled out a tax form that starts with gross/taxable income at the top. We all subtract our deductions to arrive at AGI. Then you look up your AGI in the tax tables we're both referencing to determine total tax.
The effective tax calculation is to take this tax amount and divide it by the top gross/taxable income line.
I don't care how you do it. You can do the calculation wrong as far as I'm concerned, you just have to recalculate incorrectly for Romney also to have an apples to apples comparison. Be wrong if you want to, but subtract all of Romney's deductions and calculate his "Jerry's fake effective tax rate" and draw the comparison.
Keep trying, but it's clear you're the one who doesn't know what you're talking about. You just can't take off your blinders long enough to see it. Maybe you've never filled out your own tax returns...
Jerry, it's probably time we end this because you've dug in so deep in your defense of the wrong method that you won't be willing to admit when you're wrong. Now your pride is probably involved.
It's too bad you couldn't take Will's post as a learning opportunity instead of one more reason to try and prove you're right.
OK, Heathen. Here is my last attempt to educate you.
Let's use Romney's 2010 tax return for this lesson. You can find a link to it <a href="http://www.washingtonpost.com/wp-srv/politics/documents/mitt-romney-tax-documents.html>here.</a>
Look at page 6. The Adjusted Gross Income is at the top, line 38. His AGI is 21,646,507.
From that you subtract deductions (line 40) and exemptions (line 42). Romney's deductions are 4,519,140 and his exemptions are 7300. Everybody has deductions, either itemized or standard, and exemptions.
When you subtract deductions and exemptions, you get your taxable income, line 43. In Romney's case, his taxable income is 17, 120,067.
Clearly, taxable income (line 43) and adjusted gross income are two different things, and clearly it is taxable income (line 43) that is used in the tax tables. It is what the tax tables say to use.
Apology accepted!
HR makes a very good point, Jerry. If you're going to figure out the tax percentage of a $35,000 secretary prior to her deductions (and, keep in mind, if she has a kid, she gets a $11,600 deduction), then you also have to do the same for Mr.s Romney and Buffett. Apples and apples is the only way to go here.............Look, I agree with you that we need to raise revenues and that guys like Buffett and Romney are probably the best way to start. But Mr. Obama is clearly demagoguing here and it's well beneath him, in my opinion.
Actually if you look back at the comments, you will see that I calculated Romney's tax rate both ways, before deductions and after deductions.
Jerry, here are the numbers that I come up with. For 2010, Romney's effective rate would be 17.5% (3 million in taxes and and 17.1 million in taxable income). For 2011, his effective rate would be 21.25% (3.23 million in taxes and 15.2 million in taxable income). Both of these numbers, while not quite as high as you and I would like them to be, are still significantly higher than the 11.3% that HR points out would be the rate of a single earner making $35,000 a year, and way way higher than if the at very person had a kid. You see what I'm saying here, Mr. Obama a little loosey-goosey?
Will,
Romney's 2010 rate is about the same as a single person earning about 50,000 per year and about half of someone with a taxable income equal to Romney but with the money coming from wages.
The 35,000 number is your number, not Obama's. His point is that someone making millions of dollars per year should pay a higher tax rate than an average middle class person. Is that being loosey-goosey? I guess you have decided that it is, although it appears that you agree with him. I have no particular problem with what he said.
Jerry Critter: I have no particular problem with what he said.
I don't either. But that's because I'm "jealous" and I also like to be "divisive".
Actually, the $35,000 was HR's example. Again, I agree with you that the rich should in fact pay more (my proposal completely does away with the special exemption for cap gains) but, even with the $50,000 example, there are still a few issues. Most of the people in that range also have children and each kid would knock off another $5,800 from their taxable income. I don't know, I still think that it's a lot more complicated than Mr. Obama is letting on.
You also took it on as yours when you used it in your post. I am not sure you should really lay the blame at HR's feet. He has enough problems with his confusion between adjusted gross income and taxable income.
One of the problems, Will, is that you have to keep it simple. Unfortunately, we live in an environment of "sound bites". The republicans are very good at this. They can reduce an issue to a few words. Is it an over-simplification? Yes. But if you go into detail on a complicated issue, people's eyes glaze over and you lose them.
Alright, let's put it this way, I stole it from him. LOL
Point well take on the eyes glazing over, btw.
Jerry, you're right that I was mixing the terms "total income," "AGI," and "taxable income." Unfortunately for you, my point remains and you're still manipulating the numbers to make an incorrect point. Since you don't want to see it side by side, allow me.
Romney's Effective Tax Rate, Married Filing Jointly
Total Income = 20,908,880
Adjusted Gross Income = 20,901,075
Taxable Income = 15,205,496
Total Tax = 3,226,623
Effective Tax Rate = 15.43% = 3,226,623/20,908,880
Jerry's Fake Effective Rate = 21.22% = 3,226,623/15,205,496
Median Income Earner, Married Filing Jointly
Median Income = 50,221
Adjusted Gross Income = 50,221
Taxable Income = 38,821 = Income - Standard Deduction
Total Tax = 4,974
Effective Tax Rate = 9.9% = 4,974/50,221
Jerry's Fake Effective Rate = 12.81% = 4,974/38,821
Comparison:
Romney = 15.43%
Median = 9.9%
Romney = 21.22%
Median = 12.81%
You see, Jerry, no matter how you compare it, when the comparision is apples-to-apples most* people pay a lower tax rate than millionaires like Mitt Romney. If you claim that middle class people pay more than Romney, you're lying or playing "loosey-goosey" with the truth, as Will puts it.
*I say most because "median" means 50% pay less, so that 50% plus the people above median still paying between 9.9% and 15.43% make up a majority.
HR,
The difference in our calculated rates is because you are using gross income and I am using taxable income like the definition of effective tax rate said and that you agreed with. So, you are still calculating it wrong.
As far as most people paying a lower rate than Romney is, I don't believe I ever made that assertion. If I did, show it to me.
I have no problem with most people paying a lower rate than he does. In fact, more people should. The problem is that there are many people paying a much higher rate than he does and making a fraction of what he makes.
If yoi go back to my first comment, it had nothing to do with Romney. My point was very simple. If a single person earned in the range of 30,000 to 40,000 of taxable income, they paid about the same rate as Buffett. If they earned more, they pay a higher rate. I stand by that statement.
Help me out here fellows. Romney in 2011 will be paying an effective rate of 21.25% (3.23 million on 15.2 million of taxable income; 20.9 million minus 5.2 million in deductions). The $35,000 a year single secretary will be paying an effective rate of 11.3% (based uopn the calculations that HR has provided). My question here is how much does that same secretary have to make GROSS before she she also has an effective rate of 21.25% (based upon the gross minus the standard deduction?
Alright, I just did the math for $50,000. That person would pay taxes on $44,200. The rates would be 10% on the first $8,500 ($850), 15% on the next $26,500 ($3,975) and 25% on the remaining $9,200 ($2,300). That adds up to a total tax of $7,125 and an effective rate of 16.1%. I don't know, Jerry, that's still a lot less than Romney's 21.25% from this year and even less than his 17.5% (3 million out of 17.1 million in taxable income) from 2010. I'll try it again for a $70,000 a year secretary and see what the effective rate for that is.
Alright, here it is for a single person making $70,000. That person would pay taxes on $64,200; 10% on $8,500, 15% on the next $26,500, and 25% on the final $29,200. This would add up to $12,125 a year in taxes and an effective rate of 18.9%- less than Romney's 2011 rate of 21.25% but more than his 2010 rate of 17.5%. Interesting, so it's at about $70,000 that the apples and apples comparison starts to take some shape (higher, if there are kids involved).
Will,
Your post and my original comment dealt with Buffett and his 15%, not Romney. And I don't really care at what level, be it 50,000 or100,000, that the effective tax rate equals what Romney pays. I object to is the fact that Romney is paying roughly half the top marginal tax rate for wage earners.
I guess that we were dealing with Mr. Romney because Mr. Buffett hasn't released his tax returns.......And, as you know, I am in favor of eliminating the special consideration for capital gains and, thus, I guess that we agree on the substance.
Yes.
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