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 !
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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.
The Homa Files 