Thursday, November 01, 2007

Income Tax and that Top 1%

So I've always been torn by the arguement that 'the top 1% pay the majority of taxes' and the arguement for a flat tax. I came across this article that fills in the what is left out.

Federal income tax alone for 2005 brought in 45% of the federal governments income (2.143 billion). It is true that the top 1% (average salary $1.6 mil/year) paid about 40% of the federal income tax part of the pie. However, what is often left out of that arguement is payroll taxes, which is where the middle class gets fucked and the rich don't. Payroll taxes (Social security and the like) are capped one you hit $94,200/year in salary. Anything above that isn't taxed. Social Security taxes made up 37% of the entire federal income in 2005. 37%. That's 37% coming from the first $94,200/year of salary. Do you make more than that?

So to put it another way, for someone earning exactly $94,200 their effective tax rate is 6.2% for payroll taxes. For the average 1%er at $1.6mil/year, their effective tax rate is around 0.36%! Wow, no wonder they leave out payroll taxes when making that arguement.

A lot of the 'raise your taxes' stuff is talking about raising that cap on payroll taxes and making it an actual progressive tax. When the right rolls out the 'they will raise your taxes' boogyman, if you are in the middle class making under or around $94,200 you won't see a dime more taken out. If anything, alot of the plans circulated by the left lower taxes on the middle-class. Stop voting against your best interestes and research this stuff.

Challenge your assumptions.

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