I'm sure we all read Warren Buffet's article about taxing everyone equally. And because his is an extreme case, it was easy for it to become the attack point for everyone in the world. Here is my question though, what should the limit be where you are super rich?
Our tax bracket system has some heavy penalties for middle class climbing. Say you start working at McDonalds in High School, you will most likely pay 10% of your income in taxes, if any, depending on how much you work etc. Then you go to college, get a degree and now you have a higher paying job as a Nurse, now suddenly your income is taxed 25% which is 15% more than it was just a few years ago! Of course you make more so maybe you can contribute more but should you have to?
The real issue though, is that Warren Buffet and most of the most wealthy people in America don't pay income tax as their money is made off of stocks primarily. This results in him only paying around 12% while someone making 300k (Warren makes much more than this) pays 35%!
The point is that when people attacked Warren's proposal, they did so in the context of the tax bracket system, saying the rich pay enough based on that. To this I agree, 35% is a large part of your income no matter how much you make. But he made it clear that he wasn't talking about tax brackets. This form of discussion changing is a common tactic which I find very annoying and misleading!
Keep in mind that, they way the tax brackets work, everyone pays the exact same tax percentage for each income range. For instance, ignoring all tax loopholes and deductions (which reduce tax liabilities considerably, mostly for rich people), Warren Buffet and I pay the exact same tax rate on the first $8,500 of our taxable income: 10%. We also pay the exact same rate on any of our income exceeding $379,000: 35%. Of course, I don't have any income exceeding that range, and 35% * $0 = $0 owed.
ReplyDelete35% *sounds* like a lot, but once you're getting into someone who makes millions or billions of dollars, it's really negligible. I think a slight increase on those making $200,000 and over (or even less than that, I'm willing to chip in more) and a drastic increase on those making $1 million or more a year would go a long way to helping us out of our quagmire. And, of course, letting the Bush tax cuts, which were designed to be temporary, expire.
Keep in mind the top tax bracket in the 50s, those glorious halcyon days that conservatives want to return to, was 90% (!), and in Reagan's era, it was 50%. Our top tax bracket is the lowest it's ever been, excluding the first few years when we were experimenting with the income tax, and a brief interlude during the Great Depression.
The top bracket in the 50's of 90% and 50% in the 80's (it was 50% at the beginning of Reagan's era, but 28% when he left office) was only on the amount earned OVER $10 million dollars,not the entire income amount. And of course, there were far fewer people who earned that much back in those days. I'm all for EVERYONE paying a fair share of our taxes...we should all have some skin in the game. But "fair share" would also have to apply to lower wage earners who pay absolutely nothing, and even receive an Earned Income Credit refund at the end of the year...so they receive a refund yet pay no taxes. That doesn't sound too "fair" to me. We don't necessarily have an income problem as much as we have a spending problem (addiction).
ReplyDeleteBut here we have fallen into the same trap I was trying to express. Warren Buffet isn't referring to the tax bracket system. His money comes from his investments and is taxed at a very low rate. He was saying this rate is usually higher in times of economic prosperity, but that the republican party uses the tax bracket system to frame the debate and mask the way he earns money he is barely taxed on
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