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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