No. You don’t get to claim both, but for most people, the mortgage interest deduction usually trumps the standard deduction. Imagine you bought a house about 10 years ago, 60% of your payment is going towards interest. If you’re paying $2000 per month, that’s $14,400. Plus, you get to now deduct your property taxes (say another $4000 per year).
Remember they are just talking about INCOME TAX and not TOTAL FEDERAL TAXES. That’s a big difference. As I showed earlier, even a family making a fairly comfortable income can be paying a lot more in FICA than income taxes. Remember Romney’s statement that 48% of this nation are a bunch of lazy freeloaders? That’s because 48% of the people are paying no income tax, just FICA.
If you include FICA, the top 3% are paying somewhere between 20% to 25% of all taxes and not 40%. Still the top 3% are paying 20% of all taxes still sounds like an unreasonable burden.
Until you consider that just the top 1% is making 25% of all the income in the U.S. Puts that terrible burden of the Rich in a slightly different light. Doesn’t it?
A family of 5 earning $67,000 a year cannot likely afford $2000 a month in principal+interest mortgage payments. Especially when you add in your proposed $4000 a year in real estate tax. Then insurance. And probably PMI if they only earn $67K. Your example doesn’t add up IMHO.
They wouldn’t qualify for that kind of loan and if they did they wouldn’t have enough left over for 5 people to survive on.
I’m not arguing against your general point but I think you’ve set up an unrealistic example to prove it.
The idea that very high tax rates are disincentive is quite obvious, but taxes on the rich are not high. Should the 1% really pay a lower percentage than the middle-class? Perhaps you think taxes should be raised at the middle to give even more cuts for the very rich? Have you no sense of proportion?
Voyager gave a witty response when this right-wing confusion arose in another thread:
This was posted on this thread by someone: http://cdn.theatlantic.com/static/mt/assets/business/taxmageddon.png
Shows that the “richer” you are the more percentage of your taxes you pay.
The neat thing about taxes is that you can decide what to count and what to leave out. You can look at the marginal rates or effective rates.
This shows all taxes - income, payroll, sales, property, etc.
If you want to talk about how to change sales, property, or other state taxes - sure, go ahead. But that is very specific to every state, so I would suggest starting 50 threads.
That chart shows that at the Federal level taxes are indeed progressive. It’s the state taxes that are regressive. I’m assuming this is largely because of sales taxes.
Jim asked the question
Lots of restaurants have a Senior Citizens menu with lower prices for people over 55. And movie theaters commonly give discounts to both senior citizens and college students, who tend to have less money to spend. And, where I live, people over 65 get bus passes for FREE.
I’ll admit that it might makes things more complicated if we tried to haggle over every price and it’s easier to charge everyone the same price. But honestly, what’s the point of having money in the first place? It’s all about cooperation for survival. In small groups, we can remember who owes us favors and who we owe favors to. In large groups, keeping track of all that information becomes impossible, so money is a way to keep score, except favors aren’t usually transferable but money IS. But that doesn’t mean that money SHOULD be transferable. If money is just a substitute for favors, and favors expire, it’s not necessarily a good thing that money doesn’t expire. And does it really make sense for us to let someone accumulate many times more favors than any individual could possibly redeem in hundreds of lifetimes? Is it fair that you can treat people like dirt and be a jerk all the time and people are obligated to do favors for you just because somebody once gave you some money?
I think it would be fair if we had a system of money which more closely resembled the way favors actually work in real life. I see no problem with giving discounts to people who have very little money. I see no problem with expecting people who have lots of money to pay most of the taxes. I see no problem with putting limits on how much of your money you can leave to your children. The problem that I DO see is that we seem to be stuck with the golden rule: Whoever has the gold, makes the rules.
Of course that’s not true. Its even possible to tax wealth held in forms other than real estate. We certainly have the ability to tax net worth over a certain amount. We do it all the time, we call it the estate tax. Now we can always in prove how we do things so we get better enforcement but its usually the people who want to get rid of the tax for poor enforcability that try to undermine the tax.
It sounds like you are saying that taxation is a poor method of income redistribution. Maybe that’s right, but it works a hell of a lot better than what we had before the great society.
This is largely due to tax competition.
Tax competition between nations is just a race to the bottom.
Tax competition between states is cannibalism.
You probably meant dividends and investments, unless you mean municipal bond interest.
There are very few instances where there is a dividends paid deduction. These are usually in cases where the entity is not supposed be taxed at the entity level. RICs and REITs (mutual funds and real estate investment trusts). on the other hand, these dividends are not qualified dividends and cannot take advantage of the preferential dividend rate for qualified dividends.
It really depends on how you look at things. If you recognize that corporations are separate entities then the notion of multiple layers of taxation seems a bit silly. You have to look at things from a particular point of view to say that the shareholders are subject to double taxation. You basically have to ignore corporations as entities.
The effective tax rate on the top 0.01% was 42.9% in 1979 and 31.5% in 2005. Can we raise the effective tax rate for the top 0.01% to 43%?
For the top 0.1% is was 40.7 and 32.1. Can we reverse that as well?
Table 1
You will note that the national effective tax rate hovers around the 22% mark and yet every income category saw their effective tax rate go down (some more significantly than others) So how can everyone’s tax rate go down and yet the national rate remain steady? All the income moved upstream and precious little of it trickled down.
This is what people are pissed off about.
I don’t know that a more progressive tax policy is the best way to address this but its better than flattening out taxes.
The goal of the tax code is to raise revenue. The question is who to raise it from.
You have to look through a very particular lens to see the capital gains tax as double taxation. You can make an argument that dividends are double taxation, not so with capital gains. Particularly since a lot of capital gains represent value that was never taxed at the corporate level.
The classic justification for the capital gains rate was that the income tax was punishingly progressive so it wasn’t fair to tax people at the high marginal rates for capital gains recognized in one year when the value was generated over years or even decades. For example, you buy 100 shares of IBM for $5000 when you are 25 and keep it until you retire at 65 when the shares are worth $2,005,000. The tax on $2,000,000 recognized in one year is a lot higher than the taxes you wold have paid if you recognized the gain over the 40 years you owned it.
In 1960 the tax on 2,000,000 would have been $1,769,640, for an effective tax rate of 88%.
The tax on one fortieth that amount would have been about $20,000. So if evenly distributed over 40 years, the total tax would have been $800,000 for an effective tax rate of 40%.
So we used capital gains rates as a compromise. The notion that capital gains is double taxation is just an argument that has been floated by people with lots of capital gains tax and adopted by the anti-tax crowd generally.
The demise of the labor movement heralded the demise of the middle class.
Can limit this to just federal taxes (see FICA/WICA) and the effects of various common tax deductions, preferences and deferrals?
Well it’s the strange idea of intelligence that some seem to have that smart = knowledgeable, and knowledgeable = knows everything that any human knows.
So MvS is revered as an expert on all things and numerous TV dramas depict smart people as magic oracles.
I’m a member of mensa yet I don’t know dickshit about even grammar and what. That’s the reality.
My original numbers didn’t involve itemized deduction. I merely stated that if the family in question had a mortgage, their taxes would be even lower.
The standard is to allocate around 1/3 of your income to housing. The $2000/month turns out to be a slight bit higher than 1/3. ($24,000 vs. $22,333), but it’s not all that much higher, and banks usually (or use to) take into account the mortgage interest rate deduction as part of the package.
I tried to apply reasonable figures. I live in Northeastern New Jersey, I know many people who make less than $67,000, yet pay more than that as part of their rent or mortgage. It’s expensive here, but that helps keep out the riffraff. Wait, this is New Jersey, we are the riffraff!
And, $4,000 in real estate taxes is pretty darn cheap too according to my experience. Mine is our around $6,500 per year, and I moved there because the town where we say we live (but is a few blocks from us) has real estate taxes that are more than double that. If our house was a block further South, our taxes would be about $12,000 per year.
However, you’re free to make up your own damn numbers. The standard deduction is $12,200. If your filing as a married couple, and your real estate tax and mortgage interest are more than $1,016 per month, you’re better off itemizing an and not taking the standard deduction. The way mortgage interest usually works, it’s more than 1/2 the mortgage payments for almost half of the life of the mortgage.
Not 1/3 of your gross income. 1/3 of your take-home pay. I’m pretty sure you won’t find many people making $67k a year with $2000/mo mortgages.
Assuming your hypothetical family has $4500 withheld annually in federal taxes, plus your calculated $5126 in FICA, plus say $2000 in state taxes, that makes $11626. Subtract that from $69000 and you have $57374. One-third of that is $19125, divided by 12 is $1594. That’s the recommended maximum they should be spending on housing. Many experts even say 1/4, not 1/3, if the family wants to have extra cash to do stuff with… and with three kids, your hypothetical family probably could use it. That would come out to $1195 a month.
Powers &8^]
Excuse my ignorance, Deeg, but isn’t “how capital gains are taxed compared to income” a tax concept/strategy?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
************* “I think ‘Hail to the Chief’ ***************
**************** has a nice ring to it.” *****************
************* John F. Kennedy (1917-1963) ****************
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
The power to tax is the power to destroy. I’ve never yet met a private business person who was in favor of higher taxes. Anyone claiming to be in favor of higher taxes isn’t concerned about abstractions such as social justice but rather with pursuing an agenda at the expense of the people who are paying the taxes.
So you propose zero taxes of any kind? Taxes can never be raised at all, from any value? Otherwise, your third sentence makes no sense.
Higher taxes than what?
And your claim is that no one concerned about social justice ever favors higher taxes?
Powers &8^]