Tax Day, the Buffett Rule, and Fairness
I did my taxes on April 15; only took me 3-1/2 hours of concentrated focus, plus frequent referrals to form instructions available online. My initial tax bracket was 25%, but after my deductions, which can be credited chiefly to my 401(k) contribution (not union = no pension), mortgage interest deduction (a middle-class do not touch EV-ER), and enormous property taxes (which have increased every year for 11 yrs — it’s called a bonus for living in Illinois — while the value of my house has declined for the third year in a row), my effective tax rate, according to TurboTax, came in at 7.5%. Meanwhile, we know the President is at a 20.5% effective tax rate, and Mitt for 2010, is at 13.9%.
Yesterday, the Senate defeated the “Buffett Rule” legislation by a vote of 51-45, with 60 votes needed to break the filibuster. The legislation would require all taxpayers earning $1 million+ to pay a 30% floor on income taxes. From a NY Times article on Monday,
A White House statement on Monday supporting the Senate bill said “one in four taxpayers with annual income greater than $1 million today pays a lower tax rate than millions of hardworking middle-class households.”
Now, the Buffett Rule is based upon the President’s concept of “fairness”, because his bud, Warren, pays a lower tax rate than his secretary (who, btw, is in the $200+k annual income range). Buffett’s tax rate, though, is based on a similar income stream like Mitt’s, investment income, which is taxed at 15%. They’re making money, off of money, they’ve already paid taxes on at a much higher rate. However, the fairness debate works both ways.
Fairness #1: I have yet to hear anyone explain to me, how having a millionaire/billionaire pay a minimum of 30% income taxes is going to help me pay my mortgage or find my neighbor a job. If someone raised my tax rate, by fiat, or by removing deductions, the result would be less money for my charities, less money for me to spend on myself or my home translating to money for the economy, and less money for me to invest that ultimately create products which create jobs.
Fairness #2: My entire family is/was middle class. According to the IRS, Americans Making over $50,000 a Year, paid 93.3% of all Taxes in 2010 (emphasis added.)
According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.
In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.
Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.
Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.
In other words, only 85 million actually paid taxes.
But Tax Foundation data also shows that people who didn’t pay any income tax received $105 billion in refundable tax credits from the IRS.
The number of people not paying taxes was recently revised upward to 49.5 million people.
Rather than demagogue this Buffett gimmick issue to death with the resultant class warfare, real “fairness” would be to have a civil discourse centered around revising the tax code so that EVERYONE pays something.