Posts Tagged ‘millionaires’

Geez, all the fuss over 7,000 rich guys…

September 26, 2011

Punch line: Chasing after a couple of thousand rich dudes seems like a wild goose chase to me.

I’m more concerned about the 50% of folks who don’t have any skin in the game … who pay no taxes and think other folks should pay more.

Old refrain: “Don’t tax you, don’t tax me, tax the guy behind the tree.”

Tax Policy Center analysis reported in The Atlantic …

76 million people won’t legally owe individual income taxes in 2011

The vast majority of this group is poor. They won’t owe individual income taxes because they won’t earn a lot of money to start, and various exemptions, like the earned income tax credit, will wipe out any tax liability … maybe even getting them a refundable credit – a check in the mail from the Feds.

Among families making more than $100,000, there will also be  half a million tax units that will also pay no income tax.

And, 7,000 millionaires will pay no individual income tax.

How can that be?

Couple of ways:

  • Tax-free income … think gov’t bonds
  • Catastrophic losses …  e.g. mansion gets wiped out by a hurricane, very high uninsured medical expenses
  • Discretionary deductions … think charitable deductions
  • Fraud and other shenanigans …

 

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Millionaires pay a lower tax rate than $50K teachers … not!

September 21, 2011

The press were abuzz yesterday debunking O’s key premise that millionaires pay taxes at a lower rate than teachers making $50,000.

Yesterday, we showed that a married  teacher with 2 kids who earns $50,000 pays at a 5.5% rate.  Even if you add 7.65 in payroll taxes to that, the resulting  13.15% is still less than a millionaire who pays only capital gains taxes at 15%.

That was a micro analysis.

The WSJ presented the macro analysis:

In 2008, the last year for which such data are available, the IRS reports that those who made more than $1 million in adjusted gross income paid an average income tax rate of 23.3%.

That’s slightly lower than the 24.1% rate paid by those making between $500,000 and $1 million, probably because the richest are like Mr. Buffett and earn more from capital gains and dividends.

The rate for a relative handful of the rich — 400 people — fell to 18%.

But nearly all millionaires still paid a rate that is more than twice the 8.9% average rate paid by those earning between $50,000 and $100,000, and more than three times the 7.2% average rate paid by those earning less than $50,000.

The larger point is that the claim that CEOs are routinely paying lower tax rates than their secretaries is Omaha hokum.

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I think the President should modify his Buffett Rule to read: anybody who earns more than $1 million … and who has accumulated wealth greater than $25 billion  … and who plans to bequeath practically all of his estate to a pal’s “foundation” shall pay an effective income tax rate of 90% … unless he /she whines that they’re being  coddled, in which case the tax rate escalates to 100%.

My real recommendation: limit the charitable estate exemption to $1 million so that Buffet has to fork about half of his estate over to the government … that’ll keep him from bring coddled in the grave.

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