OT some insight on real individual tax rates and zipcodes

Keep in mind that this figure (which comes from the IRS) is based on ADJUSTED gross income. When you earn more than $6 million/yr., which is what this group earns on the average, your real income and "adjusted" income are spread quite far apart, because their business and rental deductions are intermingled with their personal property (that Gulfstream jet is charged to the "company," but it seems to do a lot of business around the Riviera. There was a business convention there every few weeks, you see....).

The percentage of total individual income earned by this group, after these "adjustments," is about 10% of all US income. But the various deductions this group gets bring their income and tax rate pretty close to that of the average worker.

Only if you don't look at it closely.

My own opinion on this:

1) Even though social security is called a "tax", it is more like a forced savings program -- participants pay in, and then they get an annuity by the time of retirement, somewhat related to how much they paid. Additionally, there is a little bit insurance thrown in called social security disability.

I would, therefore, exclude SS from consideration.

2) Beyond this, much of the income of people with considerable assets, is in form of dividends and capital gains. The long term capital gains part is taxed very leniently. Many business ventures or executive compensation, hedge fund manager compensation and so on, is arranged so that the gains are least taxable.

In addition to this, there are some tax maneuvers that may be illegal, but are practiced. Say, if you own a rental apartment, you could write off repair costs, and throw in some money you spent on repairing your own house. That is not legal, but hard to prove. It works only if you have a rental apartment.

This is what Leona Helmsley did, and she would get away with it, if she was not such an asshole and did not try to stiff her vendors.

The so called "charitable contributions" are also, often, nothing but a sham. I consider both "church contributions" -- which are basically fees to belong to a local social club -- and "dirty goodwill clothes donations", to be a form of tax scams, judging by what I see.

They are not a real form of charity, such as writing a check to a distant charitable organization like Red Cross or NRA Foundation.

So, it is not surprising that people with income, many assets, complicated tax situations, etc have a relatively low total tax rate.

Personally, I do not think that it is fair or sensible.

I would like, personally, to belong to the "wealthy" category, but, at the same time, I recognize the unfairness of this sort of taxation. I also do not believe the bullshit about how the wealthy will "stop working" if their taxes are bring in line with the marginal tax rates on ordinary income.

I would, personally, work just as much (or little) regardless of how my long term capital gains are taxed. In any case, a long term capital gain tax is discounted _even if_ it is at the marginal income tax rate, because it is only effective when securities are sold. I have some stocks that I own since 1996, and I never paid a dime of taxes on those.

i

Some insight on the current status of Social Security

-- Unka George (George McDuffee) .............................. The past is a foreign country; they do things differently there. L. P. Hartley (1895-1972), British author. The Go-Between, Prologue (1953).

FWIW, I think that was Dan's comment. I don't want to get involved in the subject of SS payouts, because there is no hope of illumination or agreement about something that's purely a matter of one's philosophy about who should pay for what.

I think that it is part of the discussion. If the janitor paid twice the percentage of the rich man, but got a million dollars a year in benefits. And the rich guy paid in more total dollars but got nothing a year in benefits, I think even you would agree it was relevant.

It is like the woman that agree to have sex for a million dollars but would not for $10. We are just discussing the price.

Benefits have to be considered when one says the relative rates are lopsided. Yes they are, but the benefits are also lopsided in the other direction. The benefits mitigate the fact that the relative rates are lopsided.

Dan

Everybody really pays at the self employed rate! Employees have it hidden from them, but that extra money could have been wages, but the employer figures it in to his employment cost. Which includes any taxes: SS, FUTA, State unemployment taxes. Workers Comp, medical and any other insurance. And most people at more than a $1,000,000 income are paying income tax at a higher rate than a 14%. A million income may be the gross and you have expenses if you are self employed. Those are deductible. When the upper 5% pay 57% of all income taxes collected, they are not getting a free ride. The free ride is the fact that a person making $45k a year does not pay any Federal Income Tax. He is paying SS and medicare, but he will most likely collect back on that at a higher rate than he paid in. Especially if you figured the lower level wage earner had to buy an annuity and future medical policy with that same money. It is not really a tax when looked at that way. The problem is the Fed's look at it just like income tax payments they can use as they like. Not as payments on a future income string payout. Ponzi is the best description of SS and Medicare these days.

It would be, if that was the way it is. But it isn't.

How are the benefits lopsided in the other direction? They're both entitled to roughly the same benefits.

Right. But to keep it simple, the percentages I showed in my previous message are what each of them, the janitor and the rich guy, actually pay out of their gross income.

Again, that was the percentage that the people who live in that hotel pay, with an average income of $1.17 million.

That was all figured on the basis of adjusted gross income. The deductions are already taken out.

Nobody said they're getting a free ride, but your numbers do not show that at all. Can you see why?

The guy in my example has an adjusted gross income of $40k and pays 14% overall. His marginal tax rate is 25%.

Tell us what the Treasury would do with excess payroll taxes they collected, if they wanted to save that money. Specifically, what would they do with it? Invest it in French treasury bonds?

Welcome back, Ed.

I knew it would be politics and economics...

:)

Hi, Richard. This is just short stay.

It started with annealing aluminum alloys. Then I made the mistake of looking around...and saw numerous factual misconceptions that needed correcting.

Speaking of which, what do you think now of Glenn Beck's claim, over a year and a half ago now, that we were inevitably in for raging inflation, and it was coming "very soon"?

I said then that he should have read Chapter 2 of his new economics textbook before making a fool of himself. You were incredulous. d8-)

I don't think he's figured out yet how we can print so much money and not have inflation.

LOL The economy of the UK is projected to actually shrink again in 2011.

They need tax cuts and a return to the gold standard. That ought to screw them up good for another century or so.

Do they watch Glenn Beck?

LOL It's the inbreeding. Sort of like Ozark country and Alabama.

I think the only place Beck's show airs outside of the US is Korea. Some of what he broadcasts is actionable in the UK and criminally so in Canada.