So, my accountant finally wrapped up my various tax documents and for the prominent Federal Tax Return, I was surprised once again to see just how low my Effective Tax Rate is – under 5%. That’s my net tax rate after all deductions, credits, etc. Not that I’m complaining, but the tax system is so convoluted that someone that makes what I make pays less than 5% in Federal Taxes. I mean, we are a single income household and I’m not raking in huge bucks, but we’re solidly upper-middle class and paying just a fraction of our actual “tax bracket” amount. This just further illustrates that if I’m paying this little in Federal taxes, people closer to the national average income are pretty much paying nothing.
Why Is My Tax Rate So Low?
There are so many deductions available that with relative ease, one can get down to a virtually non-existent tax rate. Here are a few financial drivers for our family:
- I’m a routine contributor to my company 401K plan. Any dollars contributed reduce your taxable income by an equivalent amount.
- We just had our third child. That’s a $1000 tax credit for each child until you start to get phased out based on income limits.
- We make various charitable contributions each year, which reduces taxable income.
- We have a decent sized mortgage since we live in a relatively high cost area. Mortgage interest is deductible, as are real estate and school taxes. Even though I have an incredibly low mortgage rate at 4.625% for a conventional 30 year, it’s still a 5-figure amount lopped off income each year.
- I established an LLC for my blogs. While I brought in a decent amount of money last year, it was still in the growth phase and I had expenses that were either fully or partially deductible.
- I utilized a Flex Spending Account for health and medical expenses.
- I took my lumps last year in my taxable trading account during the market meltdown. I had recognized some losses throughout the year (here’s my Current Portfolio which is doing remarkably well this year, even in the context of the 70% in the broad market from March last year).
- There are probably a few other considerations I missed as well.
_____________________________
More Tax Tips and Deductions
- Cash for Caulkers $3000 Plan
- 7 Year End Tax Tips
- New Car Sales Tax Deduction
- Cash for Appliances Plan
- Deferred Compensation
_____________________________
For my state taxes, I’m actually getting a refund if you can believe it, because in our state, 529 plan contributions are deductible as well. So, that’s like beating the market by a few points each year in that college plan account for the kids as well. Not only does it grow tax-deferred, but I also get a refund back from the state up to something like $15K per year (I have to check that).
Who’s Paying the Taxes?
Well, most of the country isn’t. It’s pretty much the top percentage of earners. I get the notion that a family of four making $40,000 in a medium cost part of the country would struggle with a $5000 tax bill on top of the myriad state taxes and cost of living. But shouldn’t most families at least pay something? 1%? I mean, we’re all sharing in the services and expenditures of the federal government from Defense to social programs to now, healthcare, but the full burden is being borne by such a small portion of our constituency. With more tax increases on the way, this equation will only become more lopsided. It just begs that question as to how far it goes and the fairness of the whole system.
So, with a rather large tax deduction, some may question why I don’t run and adjust my W-2 immediately to make sure I’m not giving the government one of those free loans all year, but the reality is that it’s really not a big deal to me – Here’s Why.
What Was Your Effective Tax Rate?
Do You Feel It’s Too Low or Too High?
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I have had the same quandry each year as I compute my taxes and find that I owe very little in Federal income taxes. I wrote a post on it last year that goes through the math of how a family making $100,000 pays no federal income tax (and actually gets a refund of more than the amount that was withheld). When you have a country that is addicted to deductions and credits, it is only the high income earners that pay ANY federal income tax. And we keep on changing what a high income earner is (hint: it’s more than $100,000).
Financial Samurai Reply:
April 5th, 2010 at 3:46 pm
@Reputo,
Amazing ain’t it?
We should have a regressive tax, since there are so many people in America who make less than $250,000 than those who make more than $250k! 🙂
I don’t know my effective tax rate off hand, but I do know that the top 1% of earners pay upwards of 70% of the total tax taken in. That is simply ridiculous and unsustainable in the long run.
If you are in NY, and I think you are the 529 is deductible up to 5k per spouse.
Investor Junkie Reply:
April 5th, 2010 at 12:14 pm
@Evan,
Yup the NYS 529 is actually decent. If have children and not contributing, you might as well burn the money then.
Well done if you can get away with paying only 5% of your income in federal tax! I agree with you that everybody should pay a little income tax, even if it is only 1%. I think whenever you pay something into any organization, it gives you a different sense of belonging. If we look at taxes as a membership fee, it would not sounds so outrageous if everybody paid a little bit, right? I also agree with you that $5,000 or 12.5% is a lot of money for a family that brings in only $40,000 while $30,000 or 20% is not that as bad for a family who earns $150,000. Having said that, I can see how progressive taxes can easily be viewed as “unfair” just like like anything else can be viewed as “unfair”.
Man, you are SO LUCKY! I do all those things as well… and my effective is looking like 30 freaking percent! Can I shoot you a private e-mail, or do a G-chat so you can help a brother out? Seriously…. i haven’t submitted my taxes yet this yr b/c I’m aghast at my effective tax percentage.
I feel like I’m doing something wrong…. ……………
Sam
Investor Junkie Reply:
April 5th, 2010 at 12:16 pm
@Financial Samurai,
Yea you:
– work for someone else
– don’t have corp. Get one for your blog.
– don’t have a pro do your taxes.
Financial Samurai Reply:
April 5th, 2010 at 3:45 pm
@Investor Junkie, What is your effective tax rate?
After you make a certain amount, I think it’s $150-200k, basically EVERYTHING gets phased out.
Evan Reply:
April 5th, 2010 at 3:50 pm
@Financial Samurai,
I think IJ’s point is that YOU don’t have to make $150k – $200k. There are situations when your S-Corp can pay you $60K and then you have non-taxable profit of the remaining amount. That is just one technique.
My effective tax rate has been ridiculously low too for years, but it is not starting to creep up as child tax credits begin to get phased out, my mortgage interest deduction wanes, and my income steadily rises.
It was 7% last year and 9.4% this year. Next year it will probably be even higher – but it is still very very reasonable!
The truly wealthy really do already shoulder most of the tax burden in this country. Anybody that thinks otherwise needs a bit of a reality check.
All the best,
Len
Len Penzo dot Com
OK Evan, I’ll look into it.
Dang Len, only 9.7%?! Maybe I’m the only loser here. What about you E-dog? What’s your effective tax rate?
Investor Junkie Reply:
April 5th, 2010 at 6:18 pm
@Financial Samurai,
Hey FS,
I don’t remember last year’s (2008 taxes) but I believe around 18% effective rate. That’s personally, If I included my biz would add approx 5-8% more. My 2009 taxes are not done yet and have been filed an extension (my accountant is slow). As of this year I’m creating metrics to monitor our family procession (total salary – before deductions, taxes paid, effective tax rate, net worth increase, passive income, etc). I’ve started to go back in my old Quicken files and so far it’s pretty interesting what I’ve learned.
Repeat after me, it’s not how much you make it’s how much you keep. Someone like Lyndon on your blog is getting royally screwed. Single wage earner with no house, and lives in NYC. 45% effective tax rate Ouch!
Owning a business is really the only last method to legally defer, or reduce tax of any significance. If the government starts reducing deductions for businesses, it’s game over for our economy.
I’m not saying create a biz for the sole sake of the taxes (which could get you in hot water with the IRS) I’m saying put as much through your business. You have a blog, which I would consider a legit business. As Evan has mentioned there are many more options (including your salary and distributions) that can be adjusted that also affect your tax rate. Same goes for rental properties. If they are not Inced already (usually LLC) then more than likely you are missing many legal deductions.
The amount it costs per year, should outweigh your tax savings, especially in your 35% bracket. Remember Flexo saved 10k from adjusting his business from a LLC to an Inc. Keep in mind our damn tax code is 880,000+ pages, so to say it’s complex is an understatement. Also to those who own a biz like me, expect an increase in audits in the coming years. I’m not saying my accountant or I do anything illegal, but since this code is so complex and can be interpreted differently, they will leave no stone unturned. Count on this, especially the people who pay less than their peers (red flag).
Of course I’m not a tax professional (but play one on TV). Speak to someone that can help you. Hope this helps…
Financial Samurai Reply:
April 5th, 2010 at 9:03 pm
@Investor Junkie, Good points. Should I suggest Lyndon go get married, make some babies, and save some tax money? 🙂
I did my calculation of effective rate wrong. I was guestimating and including 10% California tax.
My Federal effective is lower but still above 20% unfortunately.
I’ll start a business in due time. Can’t wait to minimize taxes like you guys!
$35,000 in internet and computer expense deductions here I come! j/k, but hopefully one day! I mean, don’t I need a new laptop in each bedroom as well as a nice Audi S5 to keep up my image?
Best,
Sam
Investor Junkie Reply:
April 12th, 2010 at 11:00 am
@Financial Samurai,
I just looked up my effective tax rate for 2008 was 6.8%. This includes state and federal, but does not include corporate taxes paid. That would bump it to 10%
Keep in mind I calculate total income for the year (no AGI crap) So that includes rental income, salary, 401k matching, etc… total income for the year.
If I use the AGI the rate is 13%.
Again the reason for the low rate is what Darwin mentions as I’m in a similar situation.
Investor Junkie Reply:
April 12th, 2010 at 11:20 am
@Financial Samurai,
Also it should be noted, that are you including SS and medicare tax? I didn’t to my calculations, which they should since that’s something you have to pay and typically cannot deducted, nor included in your tax form submissions.
I’m looking at my taxes as how much I’m paying to the government, the smaller the number the better 😉
We make about $80,000 a year jointly and have about an 8% effective tax rate normally. We don’t have kids, I only contribute 6% to my 401k (we fund a Roth IRA as well), and we take the standard deduction since our mortgage interest is so low (about $3000-$4000 a year).
This year our effective tax rate was about 5% since we received a large college credit for my husband’s graduate school expenses.
I’m one of those people who cringes at how much is taken out of my paychecks. So, yes, I feel like we pay enough to taxes. I feel worse for the people who really get hit hard…
I don’t want to get rid of road work or some entitlement programs, but I think the problem is mismanagement of funds, not the lack of them. I see how much is wasted in city construction and it makes me gag.
Great article here and great comments from everyone. Taxes are painful and whatever insight I can gain here to limit the amount I have to pay, the better.
Thanks Darwin for the great info!
Let me preface by saying that I do enjoy reading your blog, and you do give some good advice, and analysis. . . BUT. . .When I read things like this. . .
“This just further illustrates that if I’m paying this little in Federal taxes, people closer to the national average income are pretty much paying nothing.”
I completely cringe, and it makes me nauseous. That statement is completely ignorant to many of the hardships middle and lower class America is going through right now! The mere fact that you make in the 6 figures, and you were able to pay an effective tax rate of 5% doesn’t mean that the tax rate is really low for people who make less money than you, no not at all. In fact it means that the tax rate for YOU is RIDICULOUSLY low, and it is BECAUSE you have money!
When will people realize that the scales are skewed so far in terms of the rich right now (depending on your definition of rich, I consider anyone in the top 5% of income rich) it is destroying our country from the inside out. Just 30 years ago, the effective tax was 90% on the top 1%, now, the top 5 can pay as little as 5%. Google pays 2.5% in taxes, meanwhile the effective tax rate (not just income, but ALL taxes) on a person making $30,000 a year is around 30% of their salary. This is because you have things like exize tax, meal tax, clothing tax, and everything else. The lower taxes are a MUCH larger % of their salary than someone in the top 5%.
It is ignorant statements like the people who make an average salary in America pay next to nothing in taxes that shows just how completely out of touch you are with ordinary Americans. Or, if you are in touch with them, you are completely oblivious to what they go through on a daily basis.
This is coming from someone who is in the top tax bracket as well, but I put people and my country as my top priority in life, not money. It means I vote for what is best for others, not myself. I wish others would have an outlook like this, but when you have a country that voted for George Bush not once but TWICE, it goes to show you how ignorant and selfish the population is.
Investor Junkie Reply:
October 28th, 2010 at 4:01 pm
@Michael Harris,
“it goes to show you how ignorant and selfish the population is.”
This type of statement always leads me back to Milton Friedman and his statement about greed:
http://www.youtube.com/watch?v=RWsx1X8PV_A
Everyone else is greedy, but not yourself.
Am I happy that Google pays 2.5% in taxes? No, but do you expect them to do otherwise? They (and everyone for that matter) does what’s in their self best interest of themselves and their shareholders. They state they are do “no evil” right? If you don’t like it don’t use their services. Nothing stops you from boycotting a company.
“It means I vote for what is best for others, not myself. ” Do you really? Do you pay more in taxes than you have to? The collective whole of everyone doing what’s right for themselves (if you want to call it greed fine), it actually does the paradoxical. It makes our society better on the whole.
The poor get their standards raised and no matter what you do poor will always exist. The poor in the USA by other country standard would make them rich.
The government always wants more money to spend, increases in taxes on anyone solves nothing. Taxes no matter what they do, usual stay around 18% of GDP.
If you wish to see more on this discussion see my guest post:
http://www.financialsamurai.com/2010/01/13/you-are-already-wealthy-stop-complaining/
Michael Harris Reply:
October 28th, 2010 at 4:57 pm
@Investor Junkie
Ahh, good old Milton, him an Ayn Rand were both completely oblivious to the free market, and are part of the problem with main stream free market people. They never calculated greed into their analysis of any market, and it is ALWAYS the downfall. Now with that being said, lets look at what you had to say. . .
“The collective whole of everyone doing what’s right for themselves (if you want to call it greed fine), it actually does the paradoxical. It makes our society better on the whole. ”
Do you REALLY believe this? You are obviously intelligent, so let me ask you, wasn’t the last great recession the by product of “everyone doing what they think are right for themselves?” The fund managers were making their companies money, the mortgage brokers were doing the same, everyone was making money hand over fist, or as you say “doing what is best for themselves”. What was the cost of it to society? Say about a loss of at least $8Trillion in wealth, and that number is climbing every day. OK, that was this recession, what about the others?
The Savings and Loan scandals. . .they cost the government over $200 Billion because a few people were “doing what is best for themselves”. How about we go back a bit more in history and look at the other market crashes. What about the crash in 1907, what was the cause “people doing what is best for themselves”. United Copper trying to corner the market because they were doing “what is best for themselves”.
Do you see the point now? What is best for yourself is decidedly NOT what is best for the country. It does not paradoxically bring the lower class up, instead it hurts the ones on the bottom the most, as is with ANY recession. Ask someone that has been out of work for the past year and a half if they are happy because the rich are getting richer, as their unemployment runs out?
Tell me if the poor in the 1930’s had their standards raised from 1920. How about the poor now? We have a larger % of poverty than we have had in over 30 years. How then is their standards increasing? If you can’t afford to live, your standards do not increase no matter how cheap a new LCD tv is.
I did read your guest column, and I must say, that you completely missed the OBVIOUS flaw in your reasoning. Let me just use this quote. . .
In terms of average income, the USA is only 13th in the world, but we still have more stored wealth than any other country.
So in terms of AVERAGE income, we are 13th in the world, yet our GDP is over double of anyone else. Hmmm, does that scream to you inequality in the US? It does to me. How about we look at health care for its citizens, education level, the life span, where does the US fall in those areas when compared to other FIRST world nations? Also, lets not third world nations like Uganda, or developing nations like India, but places like Great Britain, Japan, Germany and the other countries that are on par with us. In terms of society, where would the average person have a better chance to succeed?
The dollar is not and should NEVER be the deciding factor in what makes a country great!!! Maybe it is in people’s eyes who hold money above everything else, but then again those are the people that are always destroying our country from within, and tearing across the markets with a tsunami in their wake.
Finally, your last quote. . .
The government always wants more money to spend, increases in taxes on anyone solves nothing.
Really? I seem to recall a tax increase in the 90’s that actually put our government in the black for the first time in ages. Poverty decreased, crime decreased, average income increased, the economy grew, and we prospered as a nation. How can you with a straight face say that taxes never solves anything? How about this, if we decide to NOT keep the tax cut on the top 1%, we will save $700Billion dollars. How is that not a good thing?
You are entitled to your opinion, and I am entitled with mine. Just make sure you opinions are based on facts, and not hyperbole and campaign slogans. Everyone wants lower taxes, and more money. Nobody likes to pay taxes, but they are a necessity for ANY functioning government. If you don’t want to pay taxes, have fun with no police, no firemen, schools, roads, over 40% of the population living below the poverty line (SSI keeps 50% of seniors out of poverty and is the main source of income for most. Women over 65 live at an 11.9% poverty level, but without SSI that number jumps to over 50%).
The crux is this. In order for our country to continue to thrive, we need to make sure those that work hard, and study hard will make it to the top. That is no longer the case. Do you want to draft players on your football team based on who their fathers were, or do you want to draft the best players? Unfortunately, it is the latter. . .you only need to look at George Bush for proof. An Oligarchy never survived, even under the guise of democracy. People eventually figure it out, and when they do, I don’t want to hear people complaining that they are paying 40% in taxes, because everyone knows that will still not be the case.
Investor Junkie Reply:
October 28th, 2010 at 9:33 pm
@Michael Harris,
“They never calculated greed into their analysis of any market”
Sure they did, Ayn Rand stated there is such a thing as self destructive greed. There is a video on YouTube with Donahue where she discusses this, but I can’t remember which.
“so let me ask you, wasn’t the last great recession the by product of “everyone doing what they think are right for themselves?” Don’t forget homeowners, and government changes all made this possible. It wasn’t just the “evil bankers” it was everyone up and down the line, but yes some were more at fault than others. The government and crony capitalism come to mind as the primary suspects.
Your statements presupposes recessions are bad. Recessions and failure are good and are needed to clean out the deadwood. Remove failure moral hazard runs rampant. We had it before 2008 and have more now than ever.
Also you seem to imply that bubbles can be eliminated. They will continue to happen regardless what government seems to think they can prevent it. You can legislate out greed either. As Milton said, even communism still has greed.
“Do you see the point now?” Honestly from your examples no. You mention bubbles through history but how does it correlate to the poor? The rich I’ll admit have the ability to better cope with recessions (typically), but from the research I’ve seen they were dramatically affected also by this recession. My point about poor people specifically in the US are MUCH more wealthy than other countries this is a fact.
“Really? I seem to recall a tax increase in the 90′s that actually put our government in the black for the first time in ages.”
Were not going down the path of Clinton, Obama = good. Bush, Reagan = bad are we? Because there were many ways to spin that. It can be said there was a Republican Congress since 1994+ and since 2006 the dems have owned congress and 2008 owned the WH.
Also it can be said from numerous reports, the 90’s in the black was really an accounting trick (that changed SS) and helped fueled by tax receipts by the dot com bubble.
“Poverty decreased, crime decreased, average income increased, the economy grew, and we prospered as a nation.”
Did we really? Hasn’t the past ten years we’ve had to pay for all the 1999 partying we did? The stock market has been flat because it was Bush’s fault? The P/E 10 was 45 in 1999.
http://www.multpl.com/
We are paying now for the next bubble (housing), because we never really cleared ourselves from the dot bomb bubble and just moved on to the next. This is exactly again what we are doing now.
I suspect we’ll pay for the ultimate bubble next (govt bond). If you think what we have now is ugly you ain’t seen nothing yet.
“How can you with a straight face say that taxes never solves anything?”
If our federal government truly had a balanced budget and couldn’t print money. Yes it would, because they would be limited in how much money they would need. Inflation is the ultimate tax and that hurts the poor even more.
“Hmmm, does that scream to you inequality in the US?”
Yes and so? 80% of all millionaires are from new wealth. So that means they started from little or nothing and built up to be wealthy within their lifetime. It means you yourself CAN become wealthy if you apply yourself. So most are not trust fund babies.
“If you don’t want to pay taxes” I’m not and most libertarians are not stating no taxes so no hyperbole is needed there. The amount of taxes, the increase in taxes and regulations are the core issues.
“In order for our country to continue to thrive, we need to make sure those that work hard, and study hard will make it to the top. That is no longer the case.” I just stated 80% of millionaires are first generation. That’s not people making it to the top? That is stats from the IRS and Millionaire Next Door author.
When you say “government” who do you mean?
You know what, never mind. As I said in my first e-mail, nothing you said, heard or failed to acknowledge made any difference at all.
I put people and my country as my top priority in life, not money. It means I vote for what is best for others, not myself. I wish others would have an outlook like this, but when you have a country that voted for George Bush not once but TWICE, it goes to show you how ignorant and selfish the population is.
In other words, there is nothing I could say that would change your mind, and I never should have replied in the first place.
Investor Junkie Reply:
October 28th, 2010 at 11:04 pm
@Michael Harris,
“When you say “government” who do you mean?” Federal and why does it matter anyways?
“nothing you said, heard or failed to acknowledge made any difference at all.”
I rebutted with your comment with some statements and facts. If you present a logical, congruent, fact driven argument have no issue with it.
There are some facts you could mention about poverty that I know about, but why feed your side of the argument 🙂
I’ll let you in a little secret, I also voted for Obama (regrettably now though), but still believe he was the lesser of the two evils.
“I put people and my country as my top priority in life, not money.”
My ultimate point is people state this, really believe this, but when in reality it isn’t true. It’s OK though, it’s part of what makes us human. We care about self preservation of ourselves and family first. This is why capitalism works, and other ‘isms’ fail. I’m all for something that’s better than capitalism, but no one has shown it to exist and history has been littered with other failed experiments.
Michael Harris Reply:
October 29th, 2010 at 10:45 am
@Investor Junkie,
Capitalism doesn’t “work” any more than any other ‘ism, it is how the Rand’s and Friedman’s of the world polluted the minds of people for the past 40 years. In other words think for yourself, don’t let others to the thinking for you just because they are beneficial to yourself. I really should be driving that question at the other person in the thread, sorry for mistaking that as you.
The truth as I see it is this. There is no best ‘ism, they all have their flaws. It is up to the government to insure the population AS A WHOLE, not just the top 1% is doing well. Without that check of government, we or any nation, is no better than a Banana Republic. Capitalism, Communism, Fascism, they ALL end up in the same spot if a government isn’t in check. They will ALL end up with very few at the top with power, taking advantage of the poor, and doing nothing to improve their lives. Why? Because of what you said earlier. . .
Oh and BTW, as a whole, capitalism is no better than any others. That is what the founding fathers understood, and it is why they put so many different checks and balances in the system. You need oversight for ANY form of government, when that oversight is removed, you do things like put our nation into tremendous debt by starting two wars in the middle of a tax cut and the largest expansion of the federal government every.
Investor Junkie Reply:
October 29th, 2010 at 1:14 pm
@Michael Harris,
“Capitalism doesn’t “work” any more than any other ‘ism”
RIGHT! Let’s not talk about history then of Soviet Union, Cuba, and compare West and East Germany. Let’s not talk about Greece and France and the issues they are having currently. Let’s not talk about Hong Kong and how capitalism worked out well since they have no natural resources to speak of.
Tell us Michael where do you work? What type of job do you have? Based upon your comments, I am willing to wager you work in some public sector job. Is it a teacher?
If it is public sector to goes right to my original comment, it’s your self best interest to think the way you do. Everyone is greedy.
If it’s private sector & non union job I would be very surprised you are (if you are really honest with us).
@Michael Harris,
We’re not saying we don’t want to pay ANY taxes, Michael. That is a tired straw-man liberals like to throw out and knock down all the time. Most of us understand that state and federal governments run on taxes.
The real problem is there is currently too much government! The federal government has completely over-stepped its Constitutional bounds with all these giant gov’t obstructionist agencies (Depts of Labor, Education, Energy, the EPA, etc.) and social entitlement programs. Now the piper is here and we can’t pay him.
You said: “I seem to recall a tax increase in the 90′s that actually put our government in the black for the first time in ages. Poverty decreased, crime decreased, average income increased, the economy grew, and we prospered as a nation. How can you with a straight face say that taxes never solves anything?”
Really? Do you really believe tax increases put the government “in the black?” First off, the Clinton tax hike actually resulted in lower treasury revenues. That is backed up by a Congressional report of the Joint Economic Cmte. (Let me know if you want the link.)
Second, the gov’t was never “in the black” in the 90s; the National Debt never disappeared. What happened was the US ran a budget surplus (which simply means the gov’t spent less than it had originally planned) for four or five consecutive years – and those surpluses were due to the spending cuts enacted by a conservative Congress in the 90s.
Liberals can’t get their head around the fact that tax cuts INCREASE revenue to the Treasury and tax hikes do the opposite. This was soundly proven by the Bush tax cuts in 2003, which resulted in the four biggest years of tax revenues on record (coming off a recession, no less), and the Reagan tax cuts in the 80s that got us out of another recession. For the record, the Reagan tax cuts resulted in increased treasury revenues (compared to the year before they took effect) for 8 of the next 10 years after they were enacted.
You said: “The crux is this. In order for our country to continue to thrive, we need to make sure those that work hard, and study hard will make it to the top.”
This is just about the only assertion that you really got right. Unfortunately, why would you honestly expect anybody to keep working hard when the government wants to take a good chunk of the fruit of everyone’s hard labor and redistribute it?
According to you, individuals who are in the top 5th percentile of income (which is only about $100,000 annually per Wikipedia) are “rich.” I guess I’m rich according to your standards. I live in a modest home in an average bedroom community, drive an average car, and eat hamburger helper once or twice a month. If I’m lucky I can take my family on a vacation to Hawaii (nothing fancy to be sure) once per year.
So you think it is right for the government to forcefully take more of my earnings so they can redistribute it (inefficiently, I might add) to other people they think is more deserving – because they know better than I do, of course. Well, if you get your way, there goes my vacation. (Thanks, Michael.)
You said: “I put people and my country as my top priority in life, not money. It means I vote for what is best for others, not myself.”
I’d be really interested to know who these “others” are, because it sure ain’t the great majority of us hard working Americans. You’re not doing what’s best for me and my family, buddy. The real irony is, you aren’t even helping those that need help the most – the poor.
The liberals don’t have the moral high ground here. Nobody is buying it anymore and that’s why they are going to take it on the chin in a few days.
Milton knew what he was talking about. “Greed” is good. America was built on capitalism and individuals pursuing their own self-interest. “Greed” is also why even the poorest percentile of Americans has a living standard that is better than 62 percent of the world’s population (according to UNESCO).
Investor Junkie Reply:
October 28th, 2010 at 11:14 pm
@Len Penzo,
Hey you got a few facts wrong but overall correct:
“According to you, individuals who are in the top 5th percentile of income (which is only about $100,000 annually per Wikipedia) are “rich.””
It’s about $190k in 2010. In 2007 (the latest IRS figures) it was about $170k. I don’t have the exact stats in front of me, but much higher than $100k.
In reality income != wealthy anyways, but don’t tell the government this as one day they will figure out they need to tax your net worth.
The real problem is there is currently too much government! The federal government has completely over-stepped its Constitutional bounds with all these giant gov’t obstructionist agencies (Depts of Labor, Education, Energy, the EPA, etc.) and social entitlement programs. Now the piper is here and we can’t pay him.
Stop with the “we can’t even pay for him. If you REALLY thought that, you wouldn’t be bitching about the return to the pre-Bush era tax cut. That is a BS argument, and you are being called on it.
Really? Do you really believe tax increases put the government “in the black?” First off, the Clinton tax hike actually resulted in lower treasury revenues. That is backed up by a Congressional report of the Joint Economic Cmte. (Let me know if you want the lin
Yes I do want the link, because I KNOW what the tax income of the US, and I know again you are LYING! Here is the actual data. . .
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200
So tell me Mr. Wizzard, where is this Joint Economic Committee paper, because I can guarantee that if it even exists, and that I doubt to begin with, it was written buy the congressional congressmen of the GOP, the same ones that took a $250Billion surplus and turned it into a $1Trillion+ deficit with the economy on the brink of disaster.
Here is your next Faux Pas, or should I say complete outright lie. . .
Second, the gov’t was never “in the black” in the 90s; the National Debt never disappeared. What happened was the US ran a budget surplus (which simply means the gov’t spent less than it had originally planned) for four or five consecutive years – and those surpluses were due to the spending cuts enacted by a conservative Congress in the 90s.
Is this one in your non existent paper too? Or is this just in your fictitious world of GOP spin and Fox News? The same link actually has the outlays for each year, and if you want, I can dig a little more in the data and pull out the expenditures of each branch, but since you haven’t the slightest idea about what you are talking about, I think you should just take my word on it.
Liberals can’t get their head around the fact that tax cuts INCREASE revenue to the Treasury and tax hikes do the opposite. This was soundly proven by the Bush tax cuts in 2003, which resulted in the four biggest years of tax revenues on record (coming off a recession, no less), and the Reagan tax cuts in the 80s that got us out of another recession.
Again, the SAME LINK proves you wrong YET AGAIN and AGAIN!!!! My god! You made me do my work for me, I didn’t have to go but to a SINGLE PAGE and turn your ENTIRE ARGUMENT upside down on its head, and expose you for the complete fraud that you are.
If you want to argue, come back with the FACTS!!!! Heck, I’ll leave you with something else. . .
This was from my SECOND print. . .
You are entitled to your opinion, and I am entitled with mine. Just make sure you opinions are based on facts, and not hyperbole and campaign slogans.
So now, you have two quotes that you have done EXACTLY what I said before you did them, and then you went off to be completely oblivious to what I said. Maybe you will get this, but the chances are that you won’t, and no, that ain’t the evil liberal’s fault, it is your own. Fat dumb and stupid is no way to go through life, the mere fact that you have a lot of money means just that, you have a lot of money, you lack the tack or the intelligence to comprehend what I have been telling you, the self awareness to realize how your own words are perceived, and the tact to do so in a non abrasive manner.
I’d be really interested to know who these “others” are, because it sure ain’t the great majority of us hard working Americans. You’re not doing what’s best for me and my family, buddy. The real irony is, you aren’t even helping those that need help the most – the poor.
Because actually, the things I do help out the poor. I bet you don’t even know a poor person in your life, what a shame.
Oh, yea I almost forgot. . .what do you do when you first realize that everything you have been told your whole life is a lie? Do you learn from it? I would. Do you instead just ignore it and pretend it didn’t happen? Possibly, the choice is yours.
Financial Samurai Reply:
October 29th, 2010 at 12:02 am
@Michael Harris, Hook me up with some of yo money buddy!
I admit, I didn’t read all the comments cuz they are way too long.
Sam
Michael Harris Reply:
October 29th, 2010 at 10:48 am
@Financial Samurai,
Sam, it doesn’t surprise me that you didn’t read the comments, one single link contradicted everything you had to say and basically said you don’t know what you are talking about. . .but then again, if you read my last sentence, you would have understood that 😉
Oh, yea I almost forgot. . .what do you do when you first realize that everything you have been told your whole life is a lie? Do you learn from it? I would. Do you instead just ignore it and pretend it didn’t happen? Possibly, the choice is yours.
I think “I didn’t read it, because it was too long” certainly falls in the “Ignore it and pretend it didn’t happen column ;)”
Michael
Darwin Reply:
October 29th, 2010 at 8:21 am
@Michael Harris, Yup, you’ve got all the answers there guy. I don’t have the time or inclination to reply to all your rants (since I’m out hustling and earning extra money…so Obama and “spread it around”), but the premise of my article was that I was surprised that effective tax rate was so low due to the various deductions and tax breaks recently enacted. Call it too honest and attack me if you like. So, you have a comprehension problem. You also feel half the country should contribute nothing to the services the federal government provides? You obviously have socialist tendancies and socialism isn’t what made America great – capitalism is. That’s great, we all have our own opinions and nobody’s going to change anyone else’s mind. It’s like religion.
If this article fired you up, please visit:
We’re not all equal. And that’s a good thing.
http://www.darwinsmoney.com/wealth-inequality/
Michael Harris Reply:
October 29th, 2010 at 1:41 pm
@Darwin,
Actually, I found your post honest, I found the other people who were either completely lying, or oblivious to the facts in the wrong. . .at first, but your last post is a complete joke. Devoid of any meaningful content,
I did however find your statements out of touch with mainstream America, and shows that you really are clueless when you think that “half the country doesn’t contribute squat”. The amount they pay in taxes is completely outrageous when compared on an effective basis like you do.
Furthermore, you are doing the same thing as others, instead of debating on the validity of the tax system, you decide to have me “all figured out” and ignore any arguments posed to you.
So unfortunately, you fall in the same category as the latter. . .
Oh, yea I almost forgot. . .what do you do when you first realize that everything you have been told your whole life is a lie? Do you learn from it? I would. Do you instead just ignore it and pretend it didn’t happen? Possibly, the choice is yours.
Yep, just ignore it and pretend it didn’t happen. It has nothing to do with socialist tendencies, but instead it has everything to do with greed, selfishness, and the downfall of capitalism. Something everyone here is so far completely oblivious to. . .because after all you are doing well, who gives a crap about the 40million people in this country that are not on health insurance right? You have yours, screw everyone else.
That is the argument in a nutshell, and it is disgusting to think that people who think like this not only exist, but they have power and influence in government.
Everyone in this thread is pretty much sums up how the rich feel, and how utterly clueless and selfish they are. How indignant they are to people in a lower social class, and how in terms of society, you are nothing more than a parasite.
Just for your info as well, I am not poor, I have worked my way to the top because of those “evil government programs”. Things like student loans and Pell Grants, put in by Clinton that allowed me to go to college and get a degree. But then again, I should have just stayed poor because it would be cheap labor for you guys right?
Seeing how all the Capitalists like to quote Jefferson here is one for you as I bid ado. . .
Experience demands that man is the only animal which devours his own kind, for I can apply no milder term to the general prey of the rich on the poor.
Might want to consider taking the S-Corp election for your LLC. I saved quite a bit of tax by doing that… but it sounds like you’re in a pretty good position already. My effective rate was about 15% in 2009 (just the personal portion), but I have no child credits or mortgage deductions, and not a lot of deductions overall. At the same time, I’ve had no kid-related expenses or an expensive mortgage to contend with.
Im cool with you paying for stuff for me Mike! It’s OK if youve failed in life. You can do it 🙂
Darwin, hook me up! I’m the master puppeteer who can make folks comment and rant while writing the least.
Evan Reply:
October 29th, 2010 at 1:25 pm
IJ,
I am willing to bet ANYONE that Michael Harris is NOT a small business owner. ZERO CHANCE. Literally NO chance whatsoever. My Guess is teacher/union member/Court Worker…maybe middle level hospital employee.
Investor Junkie Reply:
October 29th, 2010 at 1:41 pm
@Evan,
Yup and would prove my initial point. Everyone else is greedy except you. If he admits it to us is another issue.
He’s certainly never had to make payroll or owned a company. That is obvious based upon his statements.
I would love to propose a mandatory class all students must take in school. Even if that’s not your lot in life, run a business for a semester. You get a grade on how well run the company at then of the semester and in comparison to your classmates. Income earned would be one obvious part of the metric but there would be many others.
I would be willing to bet people like Michael would not be making the comments they make. People that are self made never make these types of statements. If they do, it’s usually because they feel guilty they somehow cheated others (and maybe they did).
Evan Reply:
October 29th, 2010 at 1:50 pm
@Investor Junkie,
IJ, what the hell are you talking about? Why would you want to teach kids how to be a business owner? Don’t you know that all business owners are greedy, d-bag bastards that are trying to keep down the politerate
Michael Harris Reply:
October 29th, 2010 at 1:51 pm
@Investor Junkie,
Actually, you are dead wrong, as I have owned businesses in the past, and I am in the middle of starting up another business. What do they say about assumptions?
I was once a commercial lobsterman, and ran my own business at 20. Now I am in the middle of setting up another business with my brother in law. I also work for defense contractors as a lead engineer, and I know my shit in life and in politics. Hence why NOBODY has decided to debate facts with me, because they know they will have their clock cleaned.
Your assumptions prove how out of touch you are with people who actually think and find out the answers for themselves. So why don’t you go turn on Glen Beck, and circle jerk over his chalkboard propaganda which has zero basis in reality. You live in a bubble, stay there and wonder why you will be paying over 40% in taxes in a few years.
Michael Harris Reply:
October 29th, 2010 at 1:56 pm
@Evan,
That is why you have no clue in life and no idea about what you are talking about. I know how many write offs I had with my business, and I know how many I am going to be getting with this one. I know how to hide money, and what a joke it is for anyone with money to make more of it. What is that, the first million is always your hardest?
Just because I don’t subscribe to a failed philosophy with no basis in reality doesn’t mean I am automatically a teacher, a union worker or any other sweeping generalization you want to lie to yourself about so you can ignore the fact that you are 100% wrong about almost everything you have said.
Evan Reply:
October 29th, 2010 at 2:04 pm
@Michael Harris,
100% of what I have said? I don’t think I have said anything.
I find it interesting you bash the system that allows you to, “hide money, and what a joke it is for anyone with money to make more of it.”
Failed philosophy with no basis in reality? I am not even sure what you are arguing anymore. Are you saying capitalism isn’t based in reality? or are you saying that a liberatarian philosophy isn’t based in reality?
You just seem really really angry. It isn’t a “I disagree angry” it is a Darwin and Len and IJ slept with my wife and ran my business into the ground angry.
Maybe you would have a more civil convo with people if you didn’t just keep saying they are wrong and telling them they are an idiot.
Investor Junkie Reply:
October 29th, 2010 at 2:16 pm
@Michael Harris,
Hi Michael,
I’m glad your a biz owner then, isn’t it the same ones you are calling greedy then? But only other business owners that are greedy right? Who exactly are you calling selfish/greedy then? It can’t be business owners since you are one of them is it?
“what a joke it is for anyone with money to make more of it.” Then why start a new business, you already have ‘enough’ of it according to you.
Come on, your arguments go around in circles and you know it. You are acting like your everyone else’s poop stinks but yours.
“you will be paying over 40% in taxes in a few years.” So I guess you are taking you’ll be too right? That is unless you are trying to “hide” it. Which again goes back to my original statement, everyone else is greedy but you.
Michael, that link is from the Tax Policy Center which is an arm of the liberal Brookings Institution and Urban Institute. Not only that but the link shows TOTAL Federal tax receipts – corporate, payroll, excise, inheritance, individual, etc. What does that prove with respect to my argument?
My comment about tax hikes resulting in lower revenues applied to INDIVIDUAL taxes – you know, us “rich” people who you want to steal from so you can spend it on your pet projects (because you are so much more enlightened than us common folk.)
So if you are going to provide a link, at least provide one that backs up your argument.
Since you asked for it, here is the link you requested:
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm
I won’t be your lap dog and dig up other source material to show how off-base you are with all your other wild assertions (your claim that the Federal Government was actually “in the black” in the 1990s is enough to completely discredit you anyway. Go to the US Treasury Website if you are interested in being enlightened and look up the National Debt by year.)
And keep your hands off my hard-earned money. I’ll decide where I’m going to spend it – not you or the Federal Government.
Michael Harris Reply:
October 29th, 2010 at 2:18 pm
@Len Penzo,
Jesus, it is exactly what I said. The report is a one page hack job by a bunch of republicans. Do you see a democrats name on the paper? Nope. Do you know what that means? Probably not, because they are telling you what you WANT to hear! Here, I will break it down like this. . . ANYONE can take ANYTHING and say what they want to say by presenting only one side of the argument! Your entire “Clinton’s tax increase didn’t help close the deficit” is a prime example.
Have you ever read what the tax policy did? The increase in payments was NOT because of a decrease in taxes, it was because of closing the loopholes. Heck, your article even says so in not so many words. . .
Several conclusions follow from these data. First of all, reduction in high marginal tax rates can induce taxpayers to lessen their reliance on tax shelters and tax avoidance, and expose more of their income to taxation. The result in this case was a 51 percent increase in real tax payments by the top one percent.
How about this. . .The law ultimately increased the federal budget deficit, and prompted some of ERTA to be reversed or reviewed in the Tax Equity and Fiscal Responsibility Act of 1982.
Read more: http://www.investorwords.com/6502/Economic_Recovery_Tax_Act_of_1981.html#ixzz13lz37ajz
There were a bunch of different tax policy changes which increase revenues and resulted in a tax INCREASE under Reagan. You won’t hear about it because you seem to insulate yourself from any opposing viewpoints. That is a personal problem though, ignorance is bliss right? 🙂
Financial Samurai Reply:
October 29th, 2010 at 9:22 pm
@Michael Harris,
Send me some monay Mike! Meanwhile, pay your taxes and subsidize my lifestyle 🙂
A liberal’s guide to arguing:
1. Blame George Bush
2. Blame Fox News
3. Blame rich people (except George Soros)
4. Call your opponent a liar
Michael Harris Reply:
October 29th, 2010 at 3:58 pm
@Jerret,
No, that is just a moronic excuse from someone who hasn’t the gumption to debate the issues.
Ignore everything that stands before you, ignore reality, and bury your head in the sand while Rome burns around you. That so far has been the gist of every argument here, there hasn’t been one response that has been based on facts, and not hyperbole or campaign rhetoric. As I said before, ignorance is no excuse for not knowing your facts 🙂
Your effective tax rate is so low because the poor are paying the taxes, not the upper income earners (but the upper income class would like you to believe that they have it so bad). Look up the facts if you don’t believe me. If you have a 100 million poor and charge them $5 tax, that’s just as good as charging the wealthiest 2oo $2.5 million. But the wealthiest 200 aren’t baing taxed at that relative rate, because it’s the poor and uneducated who are being taken advantage of by unscrupulous, avaricious billionaires (not all billionaires suffer from this, but there are a few, and they are causing a mess!)
Darwin's Finance Reply:
December 8th, 2010 at 10:46 am
@david, David, you have to look up the facts yourself. 47% of Americans pay NO federal tax so even your $5 example is erroneous. This article was on federal tax rates and with half the country not paying a dime and the rich fronting the burden, not sure why you’re blaming them for taxes-that the poor don’t pay. Seems illogical.
Evan Reply:
December 8th, 2010 at 10:50 am
@david,
HAHAHAHAHAHHAHAH. This comment may even be more ridiculous than Michael Harris’ line of rants.
I am so excited that I subscribe to your posts Darwin
Michael Harris Reply:
December 8th, 2010 at 1:48 pm
@Evan,
Yet another man whom was born on third and thought he hit a triple in life. . .the amount of greed and selfishness is nauseating.
Darwin's Finance Reply:
December 8th, 2010 at 1:59 pm
@Michael Harris, Who are you referring to? I grew up lower-middle class. Def not third base. I also never forgot where I came from. I was just raised with different values, thats all.
Evan Reply:
December 8th, 2010 at 2:51 pm
@Michael Harris,
I am not sure if you are referring to me about starting on 3rd base, and I would really disagree. Was food ever in question? Nope, but did I get everything I wanted? No way. I paid for my own car and I paid for my law degree (well paying for it for the next 26 or so years). Parents did pick up undergrad.
Alternatively, if you are going to argue that I started on 3rd base then I would be PROUD that my parents were able to start me off there! Not because they inherited (and if they did I would be proud of my Grandparents) because both my parents grew up in lower income families and worked their tails off.
Your numbers are incorrect. The top 1% do NOT pay 70% of taxes….they have a large share of income but not a disproportionately high percentage of taxes. In fact the top 400 earners in this country, all making many millions a year, have an average effective tax rate of 16%. My effective tax rate, and I am middle class, real middle class as in I don’t have thousands in the stock market to take as losses, is around 30%.
Michael D Harris Reply:
March 17th, 2011 at 2:42 pm
@Eliz,
Bingo, tell me then, why is it fair for someone who makes over $300K a year to pay less % of their salary than someone making $60K a year?
Darwin Reply:
March 17th, 2011 at 9:52 pm
@Michael D Harris, Bingo? Wrong.
The typical American making $60,000 doesn’t pay a dime in federal taxes. If they have a couple kids, a house, they take standard deduction, etc., nothing or close to it.
Eliz’s “facts” are completely wrong.
Darwin Reply:
March 17th, 2011 at 9:48 pm
@Eliz, Oh, I’m cringing…
OK, so Evan was off with actual % paid. Here’s a fact. In 2007, the top 1% of earners paid more taxes than the bottom 95% of Americans. Read that again please. 1% of Americans paid more taxes than 95% combined.
http://economix.blogs.nytimes.com/2009/07/30/top-1-paid-more-in-federal-income-taxes-than-bottom-95-in-07/
If you’re paying an effective tax rate of 30%, you’re not middle class. We’re talking federal taxes here. So, either you have the worst accountant on the planet or you haven’t followed the conversation here regarding federal taxes.
Financial Samurai Reply:
March 17th, 2011 at 10:01 pm
@Darwin,
The top Federal tax rate is 35%. I don’t understand your statement on worst accountant on the planet.
If you make $700,000 a year, how do you NOT pay 30% effective Federal, even with a $50,000 mortgage interest shield? Then you add 5-10% for State income tax, and one is easily in the 35% effective tax range overall.
I’m under the impression that you and IJ make a a lot of money, so can you help me show how I too can lower my effective down to 10% or less?
Thx guys!
Darwin Reply:
March 17th, 2011 at 10:24 pm
@Financial Samurai, Sam’s World! Sam’s World!
too funny.
Only in Sam’s world is middle class a $700,000 income. Eliz claimed the following:
“I am middle class, real middle class”
Let’s assume that Middle, Middle class is high 5 figures. The way the tax brackets work and with the standard deduction and ANY typical deductions/credits, you’re probably talking a single digit tax rate.
Again, (please note!) – we’re talking Federal taxes only. This article, my comments, the context – it’s about federal taxes. Not state. Every state and municipality has a different tax structure and it makes no sense to compare. We can all compare federal taxes.
So, If Eliz is paying a 30% effective tax rte on federal taxes, she can’t possibly be an American citizen…or then again, maybe she, like Sam, thinks $700,000 is middle class.
Michael Harris Reply:
March 18th, 2011 at 3:46 pm
@Financial Samurai,
If you do NOT know how to shelter your money, you are not using the right accountant.
Michael Harris Reply:
March 18th, 2011 at 3:47 pm
@Financial Samurai,
Why is this article about Federal Taxes, and not SSI’s tax? If you REALLY wanted to focus on inequality, you could tell me why someone who makes $20million a year pays the SAME AMOUNT as someone who makes $120K a year. There is the REAL inequality. . .or is that not part of your agenda?
“The top-earning 5 percent of taxpayers (AGI over $159,619), however, still paid far more than the bottom 95 percent. The top 5 percent earned 34.7 percent of the nation’s adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes.”
http://www.taxfoundation.org/news/show/250.html
As the table shows in the link the top 1% actually had an average effective tax rate of ~23%… top 5% was 20%….regardless the amount paid in to the IRS is (probably) significantly more than you paid into the system. The average top 1% paid over $300K IN TAXES (not adjusted gross income – that is the check they wrote to the IRS). It would take a ton of us poor people, myself included lol, to hit that 300K tax bill…
and again, I love that Michael Harris is so angry – how did that business you claimed to have been starting up way back in April 2010 when this post was written? Have any employees that you are forced to pay 6.2% fica on them? Still loving the system LOL
I am eagerly awaiting your angry (and probably hurtful) response lol
david Reply:
March 17th, 2011 at 11:23 pm
@Evan, The top 5% also own about 80% of the wealth so they need to take up a larger share of the tax burden, that is, if they wish to live in a civilized world.
Michael Harris Reply:
March 18th, 2011 at 3:51 pm
@Evan,
The top 400 families in this country own more than the bottom 150,000,000,000 people combined.
Yes you read that right, the top 0.000001% own more than the bottom 50% combined. I should HOPE they pay more taxes then the bottom 50% combined, but they don’t. The wealth inequality in this country is mindboggling, it goes to show you how there is nobody for the working class any more. You have a far right fascist GOP and a centrist Democrat Party. There is no left any more. . .that should make all you ideologs happy.
Len Penzo Reply:
March 18th, 2011 at 5:03 pm
@Michael Harris,
“You have a far right fascist GOP and a centrist Democrat Party. There is no left any more. . .”
Really? Really? LMAOROTFL! What planet are you living on, man? How can anybody take anything you say seriously when you spout off crazy statements like that? Centrist Democrat Party. OMG, you have completely lost it.
I paid about 15% in federal taxes. Over $9,000. I need me some kids or something.
Darwin Reply:
March 17th, 2011 at 10:31 pm
@Kevin @ Thousandaire.com, I have 3 kids, a decent-sized mortgage, had investment losses that year (this article’s dated!) and gave to charity. sure lowered that effective rate!
I’m not saying $700,000 a year is middle class Darwin. I’m saying how does someone who makes $700,000 a year, or over $500,000 a year for that matter (not through long term dividends) pay 10% or less Federal Tax rates? There is massive phaseouts for people making over $150,000.
I’m under the assumption that you and IJ make multiple-six figures, which is why I want to LEARN how you guys pay so little! Unless, my assumption is wrong about what you guys make.
thx
Financial Samurai Reply:
March 27th, 2011 at 3:09 am
Darwin/IJ – Response? Just let me know if my assumptions are wrong about your income, and then I think it solves the answer. Otherwise, pls provide some suggestions (besides start a company) as to how one who makes $500K or more can pay just 10% or so in Federal Taxes.
Thanks guys!
I just found something. You can only claim a $1,000 child tax credit if your income is $110,000 or less. For every $1,000 you make over $110,000, the tax credit is reduced by $50. In other words, at $130,000 income, you cannot get a tax credit.
Are you basically at $110,000/year Darwin? Because it would help the reader a lot more if you can provide some idea of how much you make so one can put the 5% Federal Tax you pay in context.
http://financialplan.about.com/od/taxplanning/a/child-tax-credit.htm
Darwin Reply:
March 27th, 2011 at 8:23 am
@Financial Samurai, I continue to be perplexed over your obsession with my income. But anyway, this is ADJUSTED GROSS INCOME, so that’s an additional factor where various items like 401k contributions, healthcare premiums, FSA, etc are all deducted out…and the article’s a few years old now.
Joe Reply:
February 12th, 2015 at 9:40 pm
@Financial Samurai,
As of 2013 (most current data available), there were over 1000 households with a $1 million AGI that paid zero federal income tax. There are so many different credits, deductions, exclusions, exemptions, deferrals, etc. I highly suggest Senator Coburn’s December 2014 Tax Decoder for tips on how to reduce and/or eliminate your tax bill. It is a couple of hundred pages long but I found it very interesting and useful.
https://web.archive.org/web/20141210013518/http://www.coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=e1f80788-49ce-4bef-b30d-2c2d074a4f7e
I stumbled upon this post and it’s comments after seeing my effective tax rate this year and being just in such a pissed off state. I have a tax guy that has been pretty good and I have a couple of scenarios that played out this year, ISO stock sale (long), income over 200k and I work for someone else (boo). Of course I expected AMT and then planned on the AMT credit in later years, but the number that has me completely wondering wtf right now….effective tax of 91%. I mean seriously, don’t get me wrong money is money and I’m up over last year, but 91% really!!!! I won’t make the same next year and apparently there is a slight penalty for that too. Seems like the rules are meant to keep people down, hard to move up when it’s stacked against. Again, just venting and it’s appreciated but wtf!
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