Why are the rich so opposed to paying taxes?

[lokij]

@amarone

Can you prove that? I just filled in a tax return spreadsheet (you can get it from http://www.excel1040.com) and found it pretty easy to enter details for a family making $80k and end up with zero income tax liability. My fictitious family:

[ul]
[li]made $80k gross[/li][li]put 6% into a 401(k)[/li][li]has 4 children, all eligible for the child tax credit[/li][li]Paid $3k in property taxes[/li][li]Paid $6k in mortgage interest[/li][li]Donated $1k to charity[/li][li]Put $5k in an IRA[/li][/ul]

Wow, your fictitious family sure is, well.. fictitious. Let’s crunch the numbers to see what it would actually mean. Let’s assume for the sake of argument that this family lives a county with a relatively high property tax rate, not the highest but up there, of 2%. In a happy coincidence, the median homeowner income in the county happens to be 81,029. Now, with some simple math if they’re paying 3000 dollars in tax then their home would be valued at 150,000 dollars. Wow, that’s a dump.. especially considering the median home value there is 320,000. Well, that’s ok because it helps to explain why they’re only paying 6000 a year in interest for their mortgage.

Mr. and Mrs Fictitious were responsible and wise, buying a house before planning their first child. Assuming four children with 2 years between each child (because Mrs. Fictitious isn’t a vending machine, sheesh!) and a good buffer of a year after they moved in for the first kidlet.. they’d be 9 years into their mortgage. I crunched some numbers, it just so happens that to pay right around 6000 a year in interest, nine years into a mortgage, at a reasonable 5% interest rate (Mr. and Mrs Fictitious bought into their house during the housing boom, they had good credit and got an average deal), you’d have a principle amount of just about exactly 150,000. Amazing! Well, I mean.. it kind of sucks that they’ve paid for 9 years and not actually earned any equity, but whatever… plenty of people are in their position or even upside down right now.

So, let’s see how rich and happy this lucky couple are.

According to the IRS calculator available Here the family with the figures you posted WOULD owe taxes, but not a lot. $614 to be exact, which is not nothing.

Still, that’s pretty light right? Those people are making out like bandits and not paying their fair share! Let’s see how much fat they have in a month that could be more equitably paid as taxes to unburden the wealthier ‘productive’ citizens.

According to the mortgage I ran, which was able to produce the figures you provided, they have a payment of 750 a week. With 3000 dollars a year in property taxes, that adds an additional 250 to the sum. It breaks down like this…

80,000/12= 6666 a month (Income of the BEAST throws devil horns)

6666
-1000 = Mortgage plus property taxes

• 50 = Income tax (rounded)
• 84 = Charity
• 816 = Retirement savings

---

4716 is left per month. But wait! We forgot payroll taxes, the employee share of which is 7.65 percent. That’s another 510 per month. We’re at 4206 now. What else comes out of everybody’s paychecks.. hmm. Oh! Healthcare. According to CNN money (who got their information from independent actuarial and health care consulting firm Milliman Inc), the average family of four pays 8000 dollars a year in healthcare expenses. Their employers pay the other half. We have a family of six, so let’s go with 10,000 a year for health insurance, co-pays, drugs etc. etc. That’s 833 a month leaving us with 3373 in take home pay per month, for a family of six. Looks like about half of their total income goes to taxes, medical and modest shelter. If you want to remove the mortgage and healthcare spending, the rest comes to 22% of their income, without addressing regressive taxes such as sales, sin and fuel.

The funny thing is I find myself trying to champion a family making 80,000 a year. I’m saying they pay a good portion of their income in taxes (and tax deductible expenses which they need or their income tax would be higher), leaving a modest amount left per month to pay for the dozens of other necessary expenses to maintain a family in the lifestyle you propose. They certainly aren’t poor, but they’re a far cry from being rich.

75 percent of American households aren’t that lucky when it comes to their incomes. The rich pay more taxes because they have the money and the rest of us simply don’t. If we all, rich included, want to keep living in the kind of country with the living standards that we have, there are certain fixed and non negotiable costs involved. In order to meet those costs the rich must pay a large portion, because the rest of us simply don’t have the means.

I apologize for the length of my post.

[amarone]

@lokij

Wow, your fictitious family sure is, well.. fictitious. Let’s crunch the numbers to see what it would actually mean. Let’s assume for the sake of argument that this family lives a county with a relatively high property tax rate, not the highest but up there, of 2%. In a happy coincidence, the median homeowner income in the county happens to be 81,029. Now, with some simple math if they’re paying 3000 dollars in tax then their home would be valued at 150,000 dollars. Wow, that’s a dump.. especially considering the median home value there is 320,000. Well, that’s ok because it helps to explain why they’re only paying 6000 a year in interest for their mortgage.

Mr. and Mrs Fictitious were responsible and wise, buying a house before planning their first child. Assuming four children with 2 years between each child (because Mrs. Fictitious isn’t a vending machine, sheesh!) and a good buffer of a year after they moved in for the first kidlet.. they’d be 9 years into their mortgage. I crunched some numbers, it just so happens that to pay right around 6000 a year in interest, nine years into a mortgage, at a reasonable 5% interest rate (Mr. and Mrs Fictitious bought into their house during the housing boom, they had good credit and got an average deal), you’d have a principle amount of just about exactly 150,000.

Side note: it doesn’t matter how many years they have been paying in. The interest will be about $6k when the principal is $150k

So, let’s see how rich and happy this lucky couple are.

According to the IRS calculator available Here the family with the figures you posted WOULD owe taxes, but not a lot. $614 to be exact, which is not nothing.

Although I did not include it in my post, I gave them itemized deductions for state income taxes and additional property taxes paid. There is also the possibility of local income taxes. Georgia state tax is 6% on virtually everything, and you pay property-type taxes on your car(s). That sounds like enough to make the difference.

According to the mortgage I ran, which was able to produce the figures you provided, they have a payment of 750 a week. With 3000 dollars a year in property taxes, that adds an additional 250 to the sum. It breaks down like this…

80,000/12= 6666 a month (Income of the BEAST throws devil horns)

6666
-1000 = Mortgage plus property taxes

• 50 = Income tax (rounded)
• 84 = Charity
• 816 = Retirement savings

---

4716 is left per month. But wait! We forgot payroll taxes, the employee share of which is 7.65 percent. That’s another 510 per month. We’re at 4206 now. What else comes out of everybody’s paychecks.. hmm. Oh! Healthcare. According to CNN money (who got their information from independent actuarial and health care consulting firm Milliman Inc), the average family of four pays 8000 dollars a year in healthcare expenses. Their employers pay the other half. We have a family of six, so let’s go with 10,000 a year for health insurance, co-pays, drugs etc. etc.

A good bit of the health costs would likely be employee contribution to insurance, which would actually reduce their tax liability further. And some of the rest could be in FSA or HSA, also reducing taxable income. You can pretty easily get to $100k non-taxable income by adding in deductible health expenses and beefing up retirement savings, but my target was $80k so I didn’t bother with the other stuff.

That’s 833 a month leaving us with 3373 in take home pay per month, for a family of six. Looks like about half of their total income goes to taxes, medical and modest shelter. If you want to remove the mortgage and healthcare spending, the rest comes to 22% of their income, without addressing regressive taxes such as sales, sin and fuel.

The funny thing is I find myself trying to champion a family making 80,000 a year. I’m saying they pay a good portion of their income in taxes (and tax deductible expenses which they need or their income tax would be higher), leaving a modest amount left per month to pay for the dozens of other necessary expenses to maintain a family in the lifestyle you propose.

I was not proposing any lifestyle. I was simply pointing out that it is incorrect to say that nobody earning $80k would escape federal income tax.

They certainly aren’t poor, but they’re a far cry from being rich.

I agree. I never claimed that they were. I do believe that they can afford to pay something in taxes, though.

75 percent of American households aren’t that lucky when it comes to their incomes. The rich pay more taxes because they have the money and the rest of us simply don’t. If we all, rich included, want to keep living in the kind of country with the living standards that we have, there are certain fixed and non negotiable costs involved. In order to meet those costs the rich must pay a large portion, because the rest of us simply don’t have the means.

[foolsguinea]

@Kensley

Why are the poor opposed to paying ANY taxes… I say if POTUS wants to raise taxes on ANYONE, then they need to raise taxes on EVERYONE.

Oh wait, 1/2 of the population pay NO TAXES… perhaps it’s time they start paying their fair share.

Funny how some GOP pols (Fred Thompson pulled this out in his campaign) claim that corporate income taxes tax everything everyone buys. “Businesses don’t pay taxes, their customers do.” How about you have this argument with your own party, then?

In any case, neither income taxes nor personal income tax are meant to be the be-all and end-all of government funding. Income taxes have always been marginal in this country, & to demand otherwise is to put ideology ahead of conservatism, practicality, & good sense.

And in fact, if we count payroll tax, which is a direct tax on income, much of that lower one-half pay higher taxes on their income than the upper 10%. Since the capital gains tax is so low, the Social Security FICA is capped, & dividends aren’t taxed by FICA, it’s the capital-holding class who are getting away with something here, on top of using private sector power to “tax” their debtors.

[lokij]

@amarone

Side note: it doesn’t matter how many years they have been paying in. The interest will be about $6k when the principal is $150k

Sure it matters, I wanted to show a vaguely realistic scenario in which a family of six would pay only $6k in mortgage interest yet also 3000 in property taxes. It wasn’t strictly necessary I suppose. You can manipulate numbers, but if they don’t have some actual resemblance to reality they’re not very useful as an example.

@amarone

Although I did not include it in my post, I gave them itemized deductions for state income taxes and additional property taxes paid. There is also the possibility of local income taxes. Georgia state tax is 6% on virtually everything, and you pay property-type taxes on your car(s). That sounds like enough to make the difference.

Ok, soo.. you added some other stuff you didn’t think to mention. Fine, but since we’re talking about tax burdens here.. does it really matter if the taxes are in the form of state sales tax or federal income tax? Money they pay the government, no matter the form, is money they don’t have for tax increases right?

@amarone

A good bit of the health costs would likely be employee contribution to insurance, which would actually reduce their tax liability further. And some of the rest could be in FSA or HSA, also reducing taxable income. You can pretty easily get to $100k non-taxable income by adding in deductible health expenses and beefing up retirement savings, but my target was $80k so I didn’t bother with the other stuff.

I specified that the $10,000 was the employee contribution. It would indeed reduce the family’s taxable income. Were you talking about taxable income? I thought we were talking about gross income and if there was money left to tax.

@amarone

I was not proposing any lifestyle. I was simply pointing out that it is incorrect to say that nobody earning $80k would escape federal income tax.

Incorrect. By stating they live as a nuclear family with a higher than average amount of children, who pay a mortgage and are able to contribute to a 401k and IRA you can make several very informed speculations as to their general lifestyle. You can’t be a renter and take the deductions you specified, you can’t be self-employed etc. I bet data mining could extract all sorts of useful information about Mr. and Mrs. Fictional from their tax returns.

@amarone

I agree. I never claimed that they were. I do believe that they can afford to pay something in taxes, though.

They do, if they’re anything at all like the national average, it’s close to 35-40%. It just doesn’t include income taxes in the scenario you describe. So what? I don’t pay significant capital gains, do you know why? I don’t have any to tax. It’s that simple. What I’m trying to get across to you is that if we need to raise taxes in a meaningful way, it will by necessity fall more heavily on the top percentiles. Pretending like our revenue problem is because lower income people aren’t taxed enough, or fairly, is wrong.

[amarone]

@lokij

Sure it matters, I wanted to show a vaguely realistic scenario in which a family of six would pay only $6k in mortgage interest yet also 3000 in property taxes. It wasn’t strictly necessary I suppose. You can manipulate numbers, but if they don’t have some actual resemblance to reality they’re not very useful as an example.

Everything I did was based on actual situations around here. I used a $250k house with $150k left on the mortgage. That would generate $3k or so in property taxes around here. You are the one who invented a zero/negative equity situation and then commented on how it would suck for our fictitious family.

Ok, soo.. you added some other stuff you didn’t think to mention. Fine, but since we’re talking about tax burdens here.. does it really matter if the taxes are in the form of state sales tax or federal income tax? Money they pay the government, no matter the form, is money they don’t have for tax increases right?

The post that I specifically responded to was about federal income tax, so that is what I used. I was careful to use the term “federal income taxes”, although I see I omitted “federal” from my final comment in my most recent post.

I specified that the $10,000 was the employee contribution. It would indeed reduce the family’s taxable income. Were you talking about taxable income? I thought we were talking about gross income and if there was money left to tax.

You are correct and I was not attempting to disagree with you in any way. I was just commenting on the fact that health costs were another area that would reduce the federal income tax burden and I had not even need to include that in order to get to zero fed tax.

They do, if they’re anything at all like the national average, it’s close to 35-40%. It just doesn’t include income taxes in the scenario you describe. So what? I don’t pay significant capital gains, do you know why? I don’t have any to tax. It’s that simple. What I’m trying to get across to you is that if we need to raise taxes in a meaningful way, it will by necessity fall more heavily on the top percentiles.

Of course it will - where do I say otherwise?

Pretending like our revenue problem is because lower income people aren’t taxed enough, or fairly, is wrong.

I don’t say (or “pretend”) that either. All I have said is that more people could, and should, pay federal income tax. I have stated that I would be happy to restore the Clinton tax rates, which would:

[ul]
[li]increase taxes on high earners[/li][li]bring 20 - 25% more people in to the federal taxpaying net. These would be people in approximately the third quartile of income. The bottom quartile would generally be unaffected.[/li][/ul]

[amarone]

@lokij

Sure it matters, I wanted to show a vaguely realistic scenario in which a family of six would pay only $6k in mortgage interest yet also 3000 in property taxes. It wasn’t strictly necessary I suppose. You can manipulate numbers, but if they don’t have some actual resemblance to reality they’re not very useful as an example.

Everything I did was based on actual situations around here, i.e. what I experience here in Georgia. I used a $250k house with $150k left on the mortgage. That would generate $3k or so in property taxes around here. You are the one who invented a zero/negative equity situation and then commented on how it would suck for our fictitious family.

Ok, soo.. you added some other stuff you didn’t think to mention. Fine, but since we’re talking about tax burdens here.. does it really matter if the taxes are in the form of state sales tax or federal income tax? Money they pay the government, no matter the form, is money they don’t have for tax increases right?

The post that I specifically responded to was about federal income tax, so that is what I used. I was careful to use the term “federal income taxes”, although I see I omitted “federal” from my final comment in my most recent post.

I specified that the $10,000 was the employee contribution. It would indeed reduce the family’s taxable income. Were you talking about taxable income? I thought we were talking about gross income and if there was money left to tax.

You are correct and I was not attempting to disagree with you in any way. I was just commenting on the fact that health costs were another area that would reduce the federal income tax burden and I had not even need to include that in order to get to zero fed tax.

They do, if they’re anything at all like the national average, it’s close to 35-40%. It just doesn’t include income taxes in the scenario you describe. So what? I don’t pay significant capital gains, do you know why? I don’t have any to tax. It’s that simple. What I’m trying to get across to you is that if we need to raise taxes in a meaningful way, it will by necessity fall more heavily on the top percentiles.

Of course it will - where do I say otherwise?

Pretending like our revenue problem is because lower income people aren’t taxed enough, or fairly, is wrong.

I don’t say (or “pretend”) that either. All I have said is that more people could, and should, pay federal income tax. I have stated that I would be happy to restore the Clinton tax rates, which would:

[ul]
[li]increase taxes on high earners[/li][li]bring 20 - 25% more people in to the federal taxpaying net. These would be people in approximately the third quartile of income. The bottom quartile would generally be unaffected.[/li][/ul]