Posted on 01/24/2012 9:24:01 AM PST by tobyhill
So Mitt Romney thinks his effective tax rate is about 15%.
That prompts many people to express disbelief: "What?! Most people pay a higher rate than that, don't they?"
,,,,
But assuming he's correct, here's why his effective rate is probably higher than most people's: The effective tax rate is always going to be lower than one's top income tax rate. And the top rate for roughly four-fifths of Americans is 15% or less, said Roberton Williams, a senior fellow at the Tax Policy Center.
In other words, 80% of Americans have an effective rate below 15%.
(Excerpt) Read more at money.cnn.com ...
Obama is going to bamboozle the actual Middle-Class to think that he is actually working for them but in reality they are the only ones he can take from to pay for his Social Experiment.
What they fail to tell you is that his income, when originally earned, was presumably taxed at a much higher rate. Now it is long term capital gains. The media did the same when they found out that most of H. Ross Perot’s fortune was in tax-free municipal bonds and he paid very little federal income tax.
Since most americans don’t make sufficient income to avoid the payroll taxes on their total income, then yes, since the payroll tax is about 6.2% or so, they automatically have only to be in the 9% range to pay as much or more than Romney. And it’s worse for self-employed and small business, because they have to pay all 13% or so of their own payroll taxes.
In their case, the need pay only 2% income tax to be in Romney’s range.
I'm sure Newt would love a 15%.
The US has one of the highest corporate tax rates in the world (35%). The EU rate is 25%. This is why the capital gains rate is so low in the US (15%). Throw in state and local taxes and the actual effective tax rate is close to 50%.
If the 15% cap gains is ‘unfair’ then drop the corp tax rate to compensate. It would make the US way more competitive abroad and end the practice of companies keeping profits offshore to avoid the huge tax hit. Companies would bring the money back to the US for growth and investment here instead of the perverse tax incentive to make it cheaper to reinvest abroad.
ML/NJ
Employee Social Security 2011 FICA Rate: 4.2% (in 2011 the employee rate does not match the employer one)
Employer Social Security 2011 FICA Rate: 6.2%
Employee Medicare 2011 FICA Rate: 1.45%
Employer Medicare 2011 FICA Rate: 1.45%
Total FICA 2011: 13.3% (normally 15.3%)
Romney paid 15.4% of his adjusted gross income in combined FICA and income taxes (line 61 / line 38).
So the real question should be...
Did you pay more than 2.1% in income taxes?
because 80% of ALL Americans paid 13.3% in FICA taxes alone!
Did you notice that when you point out obvious tax disparities between people who earn their living by the sweat of their own brow and those who earn their living off the sweat of other people’s brows that you get accused of playing the politics of envy?
Yes. It's a mathematics question, and they can't do the numbers. They want to argue about why the train left the station at 5 pm and averaged 60 mph.
So, no matter how you slice it, the tax code favors guys like Romney over guys like you and me. That is a fact. There may be reasons for this disparate treatment, but that doesn't stop it from being disparate.
Where did you get the notion that the "effective" rate of 15.4% that Romney paid is combined FICA and income taxes? Of course this is not to mention the fact that FICA is not applied to adjusted gross income as your calculation appears to imply but rather to WAGE INCOME up to about $108,000 of wages.
Or perhaps you are assuming that Romney's entire adjusted gross income was wage income with no income from dividends, interest, capital gains, or other investment income. Otherwise, your calculations based on the difference between the payroll tax rates for FICA and the "effective" tax rate is just a bunch of meaningless democrat party class warfare bs.
The tax rate of 15% on capital gains is a constant, so far as I know. I’ve heard no one say that an investor must pay payroll tax on what is assumed to be after tax income from income.
In the case of those who are given their pay in the form of capital gains, there truly is a MATHEMATICAL disparity with those who do not.
I repeat that in my humble opinion a household should be considered a business and that all expenses to run that household should be taken out of consideration. Every employee should be considered a contractor selling his services for this purpose.
Deduct the house, the utilities, the transportation, the commo, clothing,...you name it.
If you are comparing his effective tax rate as a percentage of his wage income then it is probably several thousand percent rather than 2%.
As for your assertion that his effective tax rate is only about 2%, based on your errant calculation of taking the difference between the FICA rates on wages and his estimated 15% effective tax rate, are you being deliberately misleading or just ignorantly misleading?
What you know about taxes could be smoked in a crackpipe in 2 minutes.
Otherwise, if capital gains are invested in capital then they are simply not going to be taxed.
That would turn all capital gains into the functional equivalent of a 401(k).
You could also eliminate 401(k) and equivalent plans and leave the savings function up to the individual wage earners or dividend earners.
That way the several million bucks guys like Mitt Romney and Warren Buffett pull out of their investments to finance their multiple homes, multiple cars, personal physicians, travel and food, shelter and clothing would be taxed just like the ordinary wage earner's income that goes for food, clothing and shelter!
No, I'm not because Mitt Romney does not have a "wage" income. Probably never did. I'm comparing the income from all sources from Romney and the income from all sources for Joe Six Pack.
Joe Six pack making $20 an hour has a minimum effective income tax of 15% just by his FICA contributions and probably another 15% tax on his earned income making his overall effective income tax rate somewhere in the neighborhood of 30%. So the headline is clearly misleading.
I make "too much" to get the EITC or tax deductions for my two teenage sons, both of which literally eat me out of house and home.
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