Do I need a tax cut? Convince me:
I am rounding, of course. You don’t have to know exactly what we made last year.
Gross adjusted income = 45,000. This is without about 3,000 of pre tax stuff such as 401K and medical insurance.
Married, filing jointly, no dependents, so exemptions + standard deductions = 12,950.
45,000 - 12,950 = 32,050
Still only in the 15% bracket so tax = 32,050 * 0.15 = 4,807.50
Now our net income was about 48,000 before pre-tax stuff, so the real percentage of our income paid was:
4,807.50 / 48,000 = 10.02%.
Now all things being equal, if GW’s tax plan goes through (15% bracket would be 10%), I would have paid 3,205.
4,807 - 3,205 = 1,602. Eerily close to the “savings” amount touted around. We must be that typical working family I’ve been hearing so much about. This would make my effective income tax rate:
3,205 / 48,000 = 6.68%
Now next year, we will be able to itemize. We bought a house in September and didn’t pay enough interest to itemize this year. Next year will be a different story and the amount of income tax I pay will be less. Much less.
Now, I’m talking about straight income tax here, not payroll taxes (You can debate that elsewhere). Just income taxes. As a 2 income family with no children, not itemizing anything, married filing jointly, do I pay too much in income taxes? Am I middle class? 10% seems like a reasonable effective rate. So does 6.7%.
Don’t get me wrong. I could use that $1,602.00, but tax cuts aren’t (or shouldn’t be) about what’s good for me but about what’s good for the country. Is it good for the country to give me and everybody who makes more than me at least 1,600 in tax breaks? Remember that if the only thing in that tax plan that passes is the lowering of the bottom rate to 10% then me and everybody who makes more than me gets that same $1,600.00 tax break.
Convince me that I pay too much income tax.