In his speech, the President’s teleprompter hammered that millionaires and billionaires have lower tax rates than teacher’s making $50,000.
Hmm.
Let’s think about that.
A high earner who makes all of his money from dividends and capital gains pays 15%. Maybe a tad less after deductions – but the deductions (charity, state & local taxes, mortgages) should be rounding error. So, let’s call it 15%
What about a teacher earning $50,000 – all from his teacher’s pay?
Well, let’s assume that he’s married with 2 kids.
What does he pay in taxes?
Answer: 5.5%.
A married person filing jointly gets a standard deduction of $11,400
A married taxpayer with 2 kids gets $14,600 in exemptions (4 times $3,650)
So, the taxpayers taxable income is $24,000 ($50,000 less $11,400 less $14,600)
Taxes on $24,000 are $2,762.50 ($1,675 plus 15% of the taxable income over $16,750)
That’s an effective rate of 5.5%
You see, the standard deduction and exemptions are what analysts call statistically significant.
Come on Mr. President … at least get the numbers right !
* * * * *
Relevant Tax Facts
http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
Exemptions directly reduce your taxable income. You are allowed a personal exemption for yourself, your spouse if married filing jointly, and each person you can claim as a dependent. For 2010, the exemption amount is $3,650.
Tags: Buffet Rule, Obama, Taxes
The Homa Files 
September 19, 2011 at 5:51 pm |
What if you add payroll taxes to the equation?
September 20, 2011 at 11:24 am |
Byron York, quoting the AP on his Twitter feed:
“AP fact check: This year, $1M+ taxpayers ‘will pay an average of 29.1% of their income in federal taxes’ ow.ly.6zgXp”
and
“That’s a lot more than Warren Buffet’s 17.4%. Maybe the problem is Warren Buffett”
September 21, 2011 at 6:59 am |
[…] we showed that a married teacher with 2 kids who earns $50,000 pays at 1 5.5% rate. Even if you add 7.65 […]
September 21, 2011 at 10:24 am |
I thought using “averages” went out in the 1980’s.
November 13, 2011 at 2:56 pm |
Why assume the millionaire or billionaire has not family while the teacher does? Isn’t it more accurate to compare single people to single people and married people to married people?
Sorry for merely glancing but does this include state taxes? Specifically sales taxes that are higher on lower income people than higher income people.