GOP to Jobless: Drop Dead

[Fast_Eddie]

Ahh. It's unfortunate that I don't fall into the top tax bracket, so I can’t speak from personal experience- but it's my belief that people who fall into the scenario you describe above don't actually *pay* anywhere near 42.65% of their income in taxes. If fact, I suspect it is much, much less than that.

In 2007, Warren Buffett rather famously derided the tax system that allows him, the third richest man in the world, to pay less in taxes than his secretary.

http://www.timesonline.co.uk/tol/mon...cle1996735.ece

I believe the truth of the matter is, that for all the talk of "taxing the rich", our current system allows them many, many loopholes to prevent them from paying anything close to the rates often bantered about by the conservative pundits. Buffet claims he paid less than 18% while making no effort to pay less than his share.

I think the sad truth is, the convoluted tax system is set up the way it is on purpose. It allows the wealthy folks, a.k.a. the lawmakers, to point at a number and say "look, that's almost half my income that goes to taxes!" while at the same time providing them myriad ways to avoid paying taxes that are not available to you and me. I'd love to see a much simplified tax system for that reason, and the "fair tax" you posted about yesterday is sounding better and better to me. I love the idea of national Sales Tax. I tend to save money and not spend a lot. My taxes would drop like a rock. I've also long been in favor of an increased gas tax to build motivation for using less gas - increasingly a security issue. Everything about the "fair tax" seems to reward good behavior and punish poor decisions. That makes sense to me.

[whell]

Originally Posted by Fast_Eddie

Ahh. It's unfortunate that I don't fall into the top tax bracket, so I can’t speak from personal experience- but it's my belief that people who fall into the scenario you describe above don't actually *pay* anywhere near 42.65% of their income in taxes.

My post wasn't referring to marginal tax rates. I was referring to income tax rates.

[Fast_Eddie]

Originally Posted by whell

My post wasn't referring to marginal tax rates. I was referring to income tax rates.

I stand by my statement- I don't think you can find anyone actually paying 42% in taxes.

I found this article on what Americans actually pay:

http://economix.blogs.nytimes.com/20...-pay-in-taxes/

"The main findings: The overall effective federal tax rate (the ratio of federal taxes to household income) was 20.7 percent in 2006, with the highest quintile of American households paying 25.8 percent of their income in federal taxes."

This is no where near 42% or even 35%. Those figures are, at best, misleading.

[whell]

Originally Posted by Fast_Eddie

I stand by my statement- I don't think you can find anyone actually paying 42% in taxes.

I found this article on what Americans actually pay:

http://economix.blogs.nytimes.com/20...-pay-in-taxes/

"The main findings: The overall effective federal tax rate (the ratio of federal taxes to household income) was 20.7 percent in 2006, with the highest quintile of American households paying 25.8 percent of their income in federal taxes."

This is no where near 42% or even 35%. Those figures are, at best, misleading.

We're addressing two separate subjects: marginal or effective rates (you) versus taxes on W-2 earnings (me). You suggest my numbers are misleading by posting something unrelated. Interesting debate strategy...

[d-ray657]

Originally Posted by whell

We're addressing two separate subjects: marginal or effective rates (you) versus taxes on W-2 earnings (me). You suggest my numbers are misleading by posting something unrelated. Interesting debate strategy...

A marginal tax rate is the tax rate that applies to the last dollar of the tax base (taxable income or spending)

Changing the definition midstream. Interesting debate tactic.

Regards,

D-Ray

[whell]

Originally Posted by d-ray657

Changing the definition midstream. Interesting debate tactic.

Regards,

D-Ray

I know you're not suggesting here that taxable income is the same as W-2 income. "Taxable income" can be derived from a number of sources. W-2 income = wages. I was pretty clear about what I was referring to: W-2 income. Why try to make this into something its not?

[d-ray657]

Originally Posted by whell

I know you're not suggesting here that taxable income is the same as W-2 income. "Taxable income" can be derived from a number of sources. W-2 income = wages. I was pretty clear about what I was referring to: W-2 income. Why try to make this into something its not?

What you are ignoring is that the high rate you identified does not apply to all W-2 wages. You are actually talking about the marginal rate - the rate that applies to all income above a particular amount. Tax is not being and will not be withheld at the 42.6% rate. The tax charts take account to what the average tax rate would be if the employee earned at a particular rate throughout the year. Say an employee with an annual salary of $520k, would have wages/salary at the rate of $10k per week. The charts would take into account that the first $50k will be taxed at 15%, between 50K and 70k will be taxed at 20% and between 70K and 250k will be taxed at 28% and above that will be taxed at 35% (Making up the dividing lines here, simply for demonstrative purposes) You would look at the first weekly check and see deductions at a rate lower than 35% and the last weekly check would make deductions at a the same rate (except that income over $111k will not be taxed for social security)

Whell, do you doubt that persons earning a salary above $250k are not paying the top rate on all of their earnings. You can't say that the tax rate for part of the income (the marginal rate) is the actual tax rate that will be paid on w-2 earnings. Taking this truth into account is not changing the issue - it's refusing to acknowledge the premise of your position.

Actually, looking at your numbers again, it is absolutely false that the tax rate that applies to income over $250k is 42.6%, because at that point the taxpayer is not paying FICA, thereby reducing the marginal rate at that point to 36.4%. Therefore, your premise is not only illogical, it is factually incorrect.

Regards,

D-Ray

[Fast_Eddie]

Originally Posted by whell

We're addressing two separate subjects: marginal or effective rates (you) versus taxes on W-2 earnings (me). You suggest my numbers are misleading by posting something unrelated. Interesting debate strategy...

Okay, I'm trying here. Correct me if I'm wrong, but "marginal" tax rates refer to the higest level of tax you pay. We have a graduated taxation system and the marginal tax rate applies to the highest level of taxes you pay. It is a number, as I understand it, that is much higer than your average tax rate. Your average tax rate, again, as I understand it, refers to the percentage of tax you pay on all your income- that is, at all the rates that apply to you up to and including the portion of your income on which you pay the marginal rate.

So, no, I have no idea what you mean when you simply say "taxes on W-2 earnings". That doesn't say anything. Do you mean averge tax rate? If so, you're making your case worse as I'm reasonably certain that your 44% fiugre is speaking to a marginal rate. No way anyone is paying 44% on ALL their W-2 earnings.

Try this:

http://www.dinkytown.net/java/TaxMargin.html

If you are single, no dependents and make $1M a year (pretty sure that's none of us) you *still* only pay 32.4% average tax rate on W-2 income, putting nothing in an IRA, nothing in a 401k and with NO DEDUCTIONS AT ALL. I can't figure out a way to make more of a "worst case scenario" as I'm almost sure that would be virtually no one in the United States.

So, yes, please tell me where I'm doing anything but giving you the most favorable counter to your argument. If you are talking about average tax rates your figures are even MORE misleading than I made them out to be.

[d-ray657]

Originally Posted by whell

My post wasn't referring to marginal tax rates. I was referring to income tax rates.

The fact is that, disregarding the numerous ways there are to avoid paying taxes at the taxable rate, the actual tax rate to which you refer is would not be paid by the earners in the $250k-$500K range, which reaches up into the 99th percentile. Actually, because the president's proposal expands the 28% bracket, those whose incomes are a bit above $250k will actually pay less in taxes.

If you weren't referring to marginal tax rates, your post is even more misleading than it originally appeared. Basically, it just ain't true. Even the millionaires don't actually pay that rate on their overall tax bill. That's like saying a chocolate milk shake is nothing but chocolate. It has chocolate in it, and it tastes like chocolate, but chocolate is only a small fraction of the total ingredients.

Regards,

D-Ray