Monday, December 4, 2017

Taxes Smaxes

December 4, 2017

I’m a bit befuddled by some of what I’m reading these days about tax reform. Specifically, the numbers don’t add up when I read someone making ten times what I make pays less tax. Based on the screaming over tax reform, someone had better go tell my parents they’ve been overpaying their taxes for the last twenty-four years. According to the screamers, my parents pay less than me, and that is not true.

Here’s a close example of the breakdown for us.

Consider the spousal unit and I rake in $80,000 a year. That puts us in the middle of the middle class. 

Using the married filing jointly rates, tax collected from us is $1,865 on the first $18,650.

From $18,651 to $75,900 another $8,587.50 is collected. (That’s 15% by the way.)

Into the next bracket, the 25% bracket, from $75,901 to $80,000 another $1,025 is taken out of my pocket.

Total collected from us: $11,477.50

Consider my parents rake in $144,000 a year. That puts them above being considered middle class. Using the married filing jointly tax rates, the IRS takes from them:

$1,865 on the first $18,650.

Okay. So this is equal to anyone else making up to $18,650. I get it. Equality is good.

They, too, have a 15% tax responsibility of $8,587.50 for income between $19,650 and $75.900. All things are still equal.

Between $75,901 and $144,000 they pay at 25% for a total of $2,275.

Their tax bill is $12,727.50.

Okay! They make more than me so they are responsible for more than me.  

My question is, where did they get a tax break I didn’t get?

Since we separate church and state in the attempt to elevate Caesar, a real tax reform would be a flat 10% rate and get rid of all the deductions.
We’d be responsible for $8,000.
They’d be responsible for $14,400.
Make $1,000,000 and be responsible for $100,000.
Make $10,000,000 and be responsible for $1,000,000.

According to the IRS, in 2010 (I know it was long, long ago) if you made $1,000,000 your average effective tax rate was 20.4%, which means your tax bill was $204,000. The effective tax rate is your average rate across all brackets. 

If you earned between $50,000 and $100,000 your effective tax rate was 7.7% and you are at $7,700 or less.

If you earned $30,000 to $50,000 your effective tax rate was 4.8% and you are at $2,400 or less.

I realize this is unpopular to admit, but my brain simply does not see any of the math as proving the rich are paying less in taxes, especially when the effective tax rate stated by the IRS shows high earners pay more. This requires more thought. Maybe I can fall in line with the popular opinion and maybe I can't. 

And a side note to the IRS - just think of the money you could get from us authors if you'd stop pirates from stealing our work. I'd gladly pay taxes on those sales if I could get them. 

KC Kendricks

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