Many people seem to think it is important that we all pay federal taxes. Matthew O’Brien calculates the federal taxes he would pay if the Ryan budget becomes law.
Under Paul Ryan’s plan, Mitt Romney wouldn’t pay any taxes for the next ten years — or any of the years after that. Now, do I know that that’s true. Yes, I’m certain.
Well, maybe not quite nothing. In 2010 — the only year we have seen a full return from him — Romney would have paid an effective tax rate of around 0.82 percent under the Ryan plan, rather than the 13.9 percent he actually did. How would someone with more than $21 million in taxable income pay so little? Well, the vast majority of Romney’s income came from capital gains, interest, and dividends. And Ryan wants to eliminate all taxes on capital gains, interest and dividends.
Romney, of course, criticized this idea when Newt Gingrich proposed it back in January by pointing out that zeroing out taxes on savings and investment would mean zeroing out his own taxes.
Almost. Romney did earn $593,996 in author and speaking fees in 2010 that would still be taxed under the Ryan plan. Just not much. Ryan would cut the top marginal tax rate from 35 to 25 percent and get rid of the Alternative Minimum Tax — saving Romney another $292,389 or so on his 2010 tax bill. Now, Romney would still owe self-employment taxes on his author and speaking fees, but that only amounts to $29,151. Add it all up, and Romney would have paid $177,650 out of a taxable income of $21,661,344, for a cool effective rate of 0.82 percent.
Do these numbers or is O’Brien just engaging in class warfare? They matter a lot. The Wall Street Journal reminds us how little the bottom 40% of our population earns, even when you add in government benefits.
In 2007, the bottom 40% received 14.9% of the income (including the value of government benefits) and paid 5.9% of all federal taxes.
The top 1% during that same year earned 23.5% of income. The top 0.1% earn about half of that,about 12%, or roughly the same as the bottom 40%. If that top 0.1% no longer pays taxes, or sees a drastic drop in their rates, it becomes mathematically necessary to increase taxes on everyone else. The top 0.1% pay about 17% of all federal taxes. That will be a lot of revenue to lose at a time when people are concerned about our debt.
Beyond that, I have to wonder why those who have publicly stated they think everyone should pay federal taxes would support a plan that leaves this particular group exempt from paying them.
Fact is, capital gains, interest and dividends are NOT “income.”
The income tax rate should ONLY apply to earned income (salaries, commissions, etc.), which is why it should be as low as possible, working people, whether its a Bond Trader maker $4 Million/year or a carpenter banging nails for $48,000/year, you can pretty much be sure that BOTH are “living up to their incomes.”
Why keep taxes low on those very high incomes?
Simple! Those people have worked HARD and worked SMART to attain a specific (high maintenance) lifestyle and they tend to live in very HIGH cost-of-living places, like New York City, Boston, the metro D.C. area, San Francisco, etc. – and NOW they find that they have a somewhat extravagant lifestyle to maintain!
That ain’t easy!
Taxes on income, dividends and capital gains amounts to DOUBLE taxation, as that money was previously taxed when it was earned.
A human who starts one of those, what are they called, “companies,” and engages in “the most creative activity a human can aspire to” (building something from nothing), then takes that public and winds up with $11 BILLION worth of stock value in that company has created (at minimum) probably $200 MILLION/year or more in real value to the American economy.
Again, I don’t get why we’re looking to punish him by taking more than 1 or 2 percent of that sublime creation. Doesn’t make sense. . .EXCEPT as a disincentive to others.
“Fact is, capital gains, interest and dividends are NOT “income.”
It is commonly called unearned income. If it is not income, I am sure he wont miss it.
“Again, I don’t get why we’re looking to punish him by taking more than 1 or 2 percent of that sublime creation. Doesn’t make sense. . .EXCEPT as a disincentive to others.”
Taxes throughout history, near as I can determine, have been higher than that, and it has not stopped people from trying to make money. This wealthy person uses and benefits from public goods just like everyone else, usually more. They can pay taxes. Everyone has some special reason why they think they should not pay taxes.
Steve
“It is commonly called unearned income…” (Steve)
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There is no such animal.
Marxists call it that, of course Marx was NOT an economist, just a sub-par “social philosopher. His mathematical skills were atrocious, in-keeping with e Theology major he was.
Look we seem to fundamentally AGREE that tax rates SHOULD NEVE be used to equalize people/incomes, as those incomes are “rewards for the value placed on some services.”
The Constitution seems to be a “no backsies” vote of acceptance that some skills are 25X, 90X, even 270X more valuable than others…and there is no reason to address that disparity and no legal mechanism to do so.”
I accept that a bond trader may be worth $4 MILLION/year.
I may not like that bond trader. I’d prefer commodities brokers make such compensation.
BUT I also oppose a system that would seek to punish (tax him at a higher percentage) than lower income earners merely because he “found a good way to make a buck.”
TYPO: “A human who starts (a company)…then takes that public and winds up with $11 BILLION worth of stock value in that company has created (at minimum) probably $200 BILLION/year or more in real value to the American economy.
Whoa, and I thought Keynesians loved big multipliers.
Steve
Romney, as an investor, would still pay the business consumption tax, 8.5%, proposed by Ryan. Correct?
“The top 0.1% earn about half of that,about 12%, or roughly the same as the bottom 40%. If that top 0.1% no longer pays taxes, or sees a drastic drop in their rates, it becomes mathematically necessary to increase taxes on everyone else.”
Reagan’s tax cuts for the top 0.1% resulted in higher revenue. The math is tricky when it comes to taxes, because income is a variable.
“Reagan’s tax cuts for the top 0.1% resulted in higher revenue.”
No they didnt. He had to raise taxes because he faced such large deficits. Read almost anything by Bartlett or Stockman who were doing his budgets back then. If anything, monetary policy and growth produced, eventually, revenue.
Steve
Steve,
1. The top marginal rate was cut twice during Reagan administration – all in all, it went down from 70% to 28%.
2. Standard books on macroeconomics are clear – the revenue from top 1% went up with lower marginal tax rate. That is beyond dispute.
3. You have to be careful to distinguish between the revenue from the top 1%, and from the middle class. The revenue from the richest people went up with lower rates.
I noticed that you did not respond to my point about the corporate tax which Romney will be paying. I assume you conceded that Romney’s tax rate will include the corporate tax rate.
“He had to raise taxes because he faced such large deficits. Read almost anything by Bartlett or Stockman…” (Steve)
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I’ve read everything by Stockman (an inveterate liar) and he’s (at best) an unreliable source, given his (probable) criminal actions at Collins & Aikman.
In August 2003, Stockman installed himself as CEO of Collins & Aikman Corporation, a Detroit-based manufacturer of automotive interior components. He was ousted from that job just days before a Chapter 11 filing on May 17, 2005.
Criminal and civil charges were filed against him.
On March 26, 2007, federal prosecutors in Manhattan indicted Stockman in “a scheme … to defraud [Collins & Aikman]‘s investors, banks and creditors by manipulating C&A’s reported revenues and earnings.” At the same time, the Securities and Exchange Commission brought civil charges against Stockman related to actions he performed while CEO of Collins & Aikman.
Stockman suffered a personal financial loss, along with losses suffered by as many as 15,000 Collins & Aikman employees worldwide. Stockman said that the company’s demise was due to the consequence of an industry decline and not fraud.
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Here’s the truth, because I’d never lie to you;
“Saying Ronald Reagan raised taxes is like saying Michael Jordan was a guy who struck out a lot — or that he was a failed baseball player: It’s factually correct, but misleading, nonetheless.
“I’ve decided to examine Reagan’s tax cuts and tax increases in order to set the record straight and end this tomfoolery.
“Over the course of his two terms in office, Reagan presided over several changes to the tax code. What is important to remember — what is vital to understand — is that not all taxes are created equal.
“When Democrats or media embrace Reagan for “raising taxes X number of times,” they are usually engaging in willful obfuscation. This is because they know that when most people hear the words, “tax hike,” they naturally assume you mean raising income taxes. But tax rates (both nominal and effective) dropped dramatically across-the-board during Reagan’s tenure.
“Not only did the top individual income tax rate go from 70 to 28 percent! — but the tax code was also indexed for inflation (this is a big deal, because inflation had heretofore pushed people into higher tax brackets — a double whammy.)
“Yet the notion that Reagan was a tax-hiker has persisted. In recent years, Republicans ranging from former Sen. Alan Simpson to Reagan aide Bruce Bartlett have been cited noting that Reagan raised taxes (he did.) But their statements are often taken out of context — as if to muddy the waters — to make it appear that Reagan was a fan of tax hikes…
“…Overall, Reagan dramatically cut the most odious of taxes.
“So, for those who care about the truth, here are some details. One of the tax increases Reagan signed (the Highway Revenue Act of 1982) was a temporary increase in the federal gas tax from 4 to 9 cents. (This could be thought of as a sort of “user fee,” inasmuch as the revenue generally went to roads and infrastructure.) Another was a cigarette tax (Consolidated Omnibus Budget Reconciliation Act of 1985.) These are real tax increases, but should not be confused with the income tax.”
SEE: http://dailycaller.com/2012/06/06/ronald-reagan-raised-taxes-11-times-the-real-story/#ixzz23YUfYouJ
“The math is tricky when it comes to taxes, because income is a variable.”
I will agree strongly with this.
Steve
Which is why it was shown multiple times that cutting top marginal rate increases the revenue.
I’ve seen the book and looked over his arguments on preferences, set asides and quotas, and find them lacking in substance.
The idea that “some degree of preference is now needed to remedy the outright discriminations of the past” just doesn’t ring true and doesn’t make much sense, given we’ve done that with no other groups, and many others have suffered mighty discriminations.
It STILL comes down to supporting SEGREGATION, but ONLY when it benefits James Farmer’s ilk. . .N/G. . .IF you support segregation in principle, it’s impossible then to argue over merely how it will be applied.
Posted in wrong comments section….SORRY
Moreover, the Ryan plan would also eliminate the Alternative Minimum Tax, cut the 35 percent corporate rate to 25 percent and eliminate taxes on foreign profits. . .ALL of that is HUGE to the beleaguered working class! The first is direct relief and the last two SUPER-job creators.
As an example, two teachers in NYC, a Police Officer and a Corrections Officer (all workers who COULDN’T afford to live in NYC) earn upwards of $250,000 in combined income and are struggling working class workers in that city.
Meanwhile, a fat-cat pharmacist in Des Moines, Iowa earning $90,000/year has a much better standard of living with that income alone than any of those NYC couples.
We’ve gotta get you on board that cost-of-living tax adjuster bandwagon Steve!