This weekend I had a rather pleasant surprise. A friend of mine dropped by to have a couple of beers and BS. My friend is a very sharp guy. He’s one of the best broad base computer techs I know. And, he’s congenial, so it’s always a pleasure to chew the fat with him. Now, my friend is pretty much apolitical and doesn’t have emotional investment is many of the issues I discuss. (I think he likes to chat with me so I can get him current on the issues.) He stays focused with raising his kids, work, etc. Usually when we sip a few malt beverages, our conversations will go across a broad spectrum of issues. This time being no exception. In a part of our conversation the topic drifted to government spending, waste, debt, and taxes. Now, as I stated, he’s mostly apolitical, but, because he’s a sharp guy he couldn’t help but hear the recent cacophony about the U.S. debt and the tax discussion. And so he tells me something that just made my jaw drop. He believes the rich should pay at least the same percentage of their income as the rest of the country!
It’s a good thing we brought it up. My friend is no longer mired in ignorance. But, then it occurs to me that other people, because of the noise about the rich paying their fair share, may be under the same impression that they don’t pay a higher percentage as the rest of the country. Sigh. In order to do my part in trying to put a bit of reality into the discussion I thought I’d do a little post about the rich, taxes, and some other issues so people can get a handle on the proper issues to make an intelligent decision at the voting booth. Here are the U.S. federal tax brackets.
|Marginal Tax Rate||Single||Married Filing Jointly or Qualified Widow(er)||Married Filing Separately||Head of Household|
|10%||$0 – $8,500||$0 – $17,000||$0 – $8,500||$0 – $12,150|
|15%||$8,501 – $34,500||$17,001 – $69,000||$8,501 – $34,500||$12,150 – $46,250|
|25%||$34,501 – $83,600||$69,001 – $139,350||$34,501 – $69,675||$46,250 – $119,400|
|28%||$83,601 – $174,400||$139,351 – $212,300||$69,675 – $106,150||$119,401 – $193,350|
|33%||$174,401 – $379,150||$212,301 – $379,150||$106,151 – $189,575||$193,350 – $379,150|
Note, the above chart is taxable income. (Income after deductions.) Source, (http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Year_2011_income_brackets_and_tax_rates )
Ok, so now we can dispense with the idea that the rich is somehow in a lower tax rate than the rest of the country, in fact, they pay the most percentage wise. Now, I would be remiss if I didn’t mention some of the obscene tax breaks the rich get. And I’ll just mention, or repeat, what I stated in a prior post. A recent example of tax breaks for the rich is the clean energy tax credit. In this post I’m not singling out Dr. Hansen for anything else other than illustrative purposes. We saw he had $72,000 in cash just laying around to invest in some solar panels. (Oddly, he knows they aren’t the answer to our energy needs, but he bought it anyway.) So, he plops down the cash and suddenly the state and federal government showers him with largess! He received almost $40,000 in rebates and tax breaks! These are the tax breaks for the rich I oppose. I don’t wish poverty on anyone, and I applaud all that have accomplished financial security (or something akin to it). But, realizing I helped pay for his solar array is a bit maddening for me. Especially given that he doesn’t believe this is the way forward for this country!
Now, because I’ve been in several discussions regarding the rich and whether or not they pay their fair share, I know the next issue some rich envied individual will raise is that they have tax shelters that allow them to escape paying their taxes. In a small part, this is true, but not to where the rich as a class generally escapes paying taxes. They don’t escape the tax man.
Here is an illustration of who pays for what in federal taxes.
The way to read this table is the top 1% of income earners earn 20% of all income, but they pay 38% of all income taxes paid. The lower half of income earners earn 13% of all income paid, but only 3% of the taxes. Now, the word fair is subjective, but I’m not sure anyone can legitimately state the rich aren’t paying their fair share.
Of course, then there is the capital gains tax, the estate taxes, luxury taxes and a myriad of other taxes that would automatically prompt people to seek shelter from such taxes.
There are many things to discuss about the fairness and equity of our tax laws, but putting out misinformation about other classes of society isn’t something I believe we should engage in.
For those that believe we should still increase the tax rates in order to balance the budget, please look up Hauser’s law and the corresponding Laffer curve. I’ll close with this thought, we can’t spend our way out of debt, and we can’t tax ourselves to prosperity.
Hope this has help put some clarity in some people’s mind.