Friday, June 08, 2007

Ouch

Democrats play Robin Hood:

House Democrats looking to spare millions of middle-class families from the expensive bite of the alternative minimum tax are considering adding a surcharge of 4 percent or more to the tax bills of the nation's wealthiest households.

Under one version of the proposal, about 1 million families would be hit with a 4.3 percent surtax on income over $500,000, which would raise enough money to permit Congress to abolish the alternative minimum tax for millions of households earning less than $250,000 a year, according to Democratic aides and others familiar with the plan.

Rep. Richard E. Neal (D-Mass.), chairman of the House subcommittee with primary responsibility for the AMT, said that option would also lower AMT bills for families making $250,000 to $500,000. And it would pay for reductions under the regular income tax for married couples, children and the working poor.
You do realize that 4% of $500,000 is $20,000, right? And thats in addition to the taxes they already pay. I'm nowhere near that cutoff, but I'm in the highest tax bracket. I already pay around 50% of my gross income to some form of tax or another (income tax, property tax, medicare, social security, sales tax, phone tax, water tax etc. etc. etc.). So a family making $500,000 is currently netting approximately $250,000 -- and democrats want to take that number and make it $230,000?

Its simply brutal.

"But," you say, "that's not unreasonable. I don't even make $230,000 a year, much less $500,000. This would lower my taxes!"

Then take a look at this.
Neal has yet to release details of the plan, however, and others inside and outside the committee say major pieces of it are still in flux. Some Democrats say Neal's plan stretches the definition of the middle class too far, providing AMT relief to too many wealthy households. They argue that the cutoff for families to be spared from the AMT should be lower, at $200,000, $150,000 or even $75,000.
The definition of "middle class" is being stretched too far, you see. The tax relief should only go to families making less than $75,000! You do know that right now dual income families with one college degree between the two earners will make over $75,000, right?
The survey found that adults 18 and older with a bachelor's degree earned an average of $51,554 in 2004, compared to $28,645 for those with only a high school diploma.
No, this doesn't lower your taxes. This only continues to pave the way for people who won't work hard for their money, so they can vote to have yours.

Edit: Just food for thought. I know you've probably seen this before, but...
The top 1 percent of income earners paid 26.2 percent of personal federal income tax in 2006. They had 18.4 percent of the pre-tax income -- averaging $1.2 million.

The top 5 percent paid 44.4 percent on 33.5 percent of the income, and the top 10 percent paid 56.6 percent on 44.7 percent of income. The average income of the top 10 percent was $281,205.

As for the top 20 percent, it earned 60 percent of all income, and paid 72 percent of the taxes.
If this plan passes those numbers will be skewed even more. The top 20 percent will earn 60% of all income and pay 80% of all taxes.

2 comments:

Anonymous said...

Means nothing.

Really, the measure should be the amount of taxes paid relative to one's income.

To illustrate, compare a person making $20K a year to one making $100K a year. $50 is a lot and its expenditure warrants consideration to the person making $20K, while a person making $100K probably wouldn't blink at buying a bottle of $50 wine.

When you consider taxes paid relative to one's income, you can easily see the very wealthy are getting a bargain. Be sure to click thru to the NYTimes links.

I already pay around 50% of my gross income to some form of tax or another (income tax, property tax, medicare, social security, sales tax, phone tax, water tax etc. etc. etc.).

If you do, you're doing a number of things very wrong. I once had a colleague who claimed, much as you, that he paid 50% in taxes. I bet him that I could show him that he didn't; I won that bet. If you are paying 50% or more in taxes, you really need to see an accountant or CFP---they'll get that figure down by at least 15% without much trouble.

--Jadegold

k2aggie07 said...

First of all, that chart is all kinds of messed up. The numbers in the "reported income" column add up to 101.5% and the "percent of taxes paid" is 100% without the last column (data not available). But I'll go with it.

By the time my paycheck gets to me I'm short 27%. Add in 8.25% sales tax and you're already at ~35%.

Anyway, it doesn't matter how much the taxes are relative to one's income. Why should I pay an inordinately larger percent of my income than another person? Who cares if it "hurts" me more than him -- why should I pay 25% of my income to Uncle Sam while others literally pay nothing on the Federal level?

The point I'm concerned with is the inherent unfairness of the system. Why should those making 20.6% of the money only pay 11.6% of the taxes.

I mean if we're really going to talk bargains, how about those that are getting something for nothing?

If you want to "fix" the whole thing do some sort of flat tax, where all income is taxed at the same rate. Even if that rate is 20%, it would be more "fair" than this mess.

The biggest problem here is that the definition of middle class is (as shown) arbitrary. Its going to keep going down as Americans get richer -- eventually they'll strangle anyone with a college degree in order to pay for five or ten people who refuse to work.