Our financial system is crumbling this week.

[Leroy]

I cannot understand how someone that makes $8,500 can have a tax rate as high as 15%. Even if you factor SS tax at 6.2% (which is actually 4.2% now) and Medicare at 1.45% you don't get close to that. Even if single, you have one deduction and exemption and possibly the Earned Income Credit. I just don't see it. Maybe I'm reading it wrong, and the income on the bottom refers to taxable income.

[AWvsCBsteeeerike3]

Does anybody really think that Warren doesn't have a team of lawyers and accountants to help minimize his taxes? And if he wants to pay more, I bet the IRS would take it.

His point though is that one wealthy person paying more taxes voluntarily would net the government a few million; All of the thousands of people earning over a million a year paying a higher rate (in line with even, say, the 90s) would net tens of billions.

But, what % of those millionaires/billionaires fill out only W-2s? I could be wrong, but I would bet that the vast majority don't have desk jobs where they go to work 9-5 and get a slip every January from their company accountant. If they did, raising taxes on millionaries/billionaires/trillionaires/gagillionaires and so on would be perfect.

I think people make it too simple when they say 'Just tax millionaires more' because people that make that much can usually hide their income regardless of how you word the bill.

Where is JoD? Isn't that essentially what he does for a living? And now probably Leroy!

[vinsanity]

But, what % of those millionaires/billionaires fill out only W-2s? I could be wrong, but I would bet that the vast majority don't have desk jobs where they go to work 9-5 and get a slip every January from their company accountant. If they did, raising taxes on millionaries/billionaires/trillionaires/gagillionaires and so on would be perfect.

There's a few reasons the super rich pay a lower effective rate in taxes than you or I.

1. Capped payroll taxes. 6.2% for SS and 1.45% for Medicare capped at 106,800. So say you made $100k last year. You paid 7.65% ($7650) in SS and Medicare taxes last year. Say you made $110k. Same tax bracket and you paid $8170.20 in these payroll taxes or only 7.42745 of your income in payroll taxes. If you made $1M it's .8% of your income.

To compare using the same the same top bracket, say two people and one makes $1M and the other makes $2M. The first one pays the marginal rate of 35% plus his .8% payroll and the second pays the marginal rate of 35% plus .4% of payroll so it's a lower effective rate.

2. As you indicated, capitol gains taxes. Now, short term capitol gains taxes are based your income level and long-term is taxed between 0 and 20% based on income. I believe any stock owned for less than a year is short term and long term is held for more than 1 year. I believe, based on Buffet's Op-Ed which makes this hardly conclusive, 88 of the top 400 filers last year didn't claim a dime in income. So I can only assume that income from stock sales counts as income. If you sold off $500k worth of investments, you'll be taxed in that bracket - but only for long term capitol gains - which is 15%. So they paid 15% on their income while most of us paid at least 15% just in income tax, not to mention the 7.65% in payroll taxes.

But by eliminating the payroll tax cap and raising the top income tax rates you're still going to collect more revenue from 75% of these super rich. Raising capitol gains taxes up to 20% would hit them all as well. Then there's always things like eliminating/capping mortgage deductions which disproportionately benefit the wealthy.

[longhornbaseball]

I cannot understand how someone that makes $8,500 can have a tax rate as high as 15%. Even if you factor SS tax at 6.2% (which is actually 4.2% now) and Medicare at 1.45% you don't get close to that. Even if single, you have one deduction and exemption and possibly the Earned Income Credit. I just don't see it. Maybe I'm reading it wrong, and the income on the bottom refers to taxable income.

I messed the graph up by mixing gross wages (which is what payroll taxes are based on) with taxable income. So it isn't entirely accurate due to deductions like you said, but it is still pretty close and my point stands. The middle class is overtaxed relative to the upper class.

[cpebbles]

Does anybody really think that Warren doesn't have a team of lawyers and accountants to help minimize his taxes? And if he wants to pay more, I bet the IRS would take it.

That's an idiotic argument that I'm really tired of hearing. Buffet doesn't think we can solve problems by him paying an extra $300 million in taxes (Or whatever), he thinks we can solve problems by raising taxes on those able to pay them, who have been paying a pittance in taxes because America has somehow been convinced that the capital gains tax determines whether or not people are going to invest their money.

[planet planet]

I love when Buffett said he's never met a wealthy investor who passed on a good investment for fear of the tax rate on potential gains.

On the payroll, FICA, Medicare tax caps at approx. $105k, if you're filing jointly does that get reconciled come tax time even if as independent filers you'd pay the whole %?

[Arthur Dent]

For those of you worried about fiscal austerity, note that federal spening in 2011 will set a record, eclipsing 2010's record spending, which eclipsed 2009's record spending.

Record! Eclipsed! This would be like saying that the U.S. population set a new record last week. And the week before that it eclipsed the previous record. Growth is the norm.

Anyway, by what measure was 2010 federal spending a record? Here's the federal budget historical tables:

http://www.gpoaccess.gov/usbudget/fy12/ ... 12-TAB.pdf

2010 net outlays were down from 2009.

[Leroy]

Does anybody really think that Warren doesn't have a team of lawyers and accountants to help minimize his taxes? And if he wants to pay more, I bet the IRS would take it.

That's an idiotic argument that I'm really tired of hearing. Buffet doesn't think we can solve problems by him paying an extra $300 million in taxes (Or whatever), he thinks we can solve problems by raising taxes on those able to pay them, who have been paying a pittance in taxes because America has somehow been convinced that the capital gains tax determines whether or not people are going to invest their money.

Well, thanks for calling me an idiot. Apparently you haven't read my earlier posts, including one in which I said (or better implied) that I have no problem raising the capital gains rate. Make it simple, so the average idiot like me knows when he is getting fleeced.

[Arthur Dent]

On the payroll, FICA, Medicare tax caps at approx. $105k, if you're filing jointly does that get reconciled come tax time even if as independent filers you'd pay the whole %?

Payroll and income tax are legally independent. Income tax filing status has no impact on payroll taxes.

[vinsanity]

Does anybody really think that Warren doesn't have a team of lawyers and accountants to help minimize his taxes? And if he wants to pay more, I bet the IRS would take it.

I'm not lumping you in with this group, but people who us this argument on Buffet then turn around and defend Bachmann who rallies against government spending and takes checks for 'pray away the gay' and farm subsidies and then say "Well, just because the system is broken doesn't mean she shouldn't take advantage."

Plus, if you overpay your taxes doesn't the IRS send you a check? Tax Refunds and all that jazz?