2009 Federal Income Tax Brackets (Official IRS Tax Rates)
Update: Projected 2010 Tax Brackets Have Been Released!
The following represents the Internal Revenue Service (IRS)’s officially released 2009 federal income tax brackets. Read ‘em and weep – or perhaps rejoice, depending on where you stand on the whole federal income tax bracket sliding scale. Regardless, you’re going to be getting close and personal with the marginal rates when you file your 2009 tax return in early 2010. Let’s have a look at some of the tax changes shall we?
Official IRS Tax Rate Schedule Updates For Tax Year 2009
Via the Wall Street Journal, the following graphical table below gives you the official marginal tax brackets for married couples filing jointly as well as the marginal rates for single filers for 2009. The previous year’s numbers are also provided to give you an idea of some of the more noticeable changes since 2008. The income numbers listed in the chart below are taxable incomes, and thus they have taken into consideration all available personal exemptions as well as any of either the standard or itemized deductions, including all pre-tax above the line 401k and deductible IRA contributions.
As key portions of the marginal tax tables are pegged to inflation, quite a few numbers must be annually revised. Thus you will note that there are quite a few key changes for the 2009 tax year compared to the year prior. However, while overall tax numbers appear to have nominally increased on the whole, taking into consideration the effects of inflation, effective tax rates may actually have remained level or even dipped a bit.
Despite the text below that says “projected”, the official IRS numbers have been released and they now represent official federal income tax rate brackets, locked in for 2009.
To summarize, here is a run through of some of the more notable tax rate changes for 2009 and even a quick blurb about some of the key tax benefits that did not change based on official IRS releases thus far:
- Personal Exemption and Exemption For Dependents – Increased to $3,650 from $3,500 (up $150) from 2008, but is phased out at higher income levels.
- Standard Deduction – The great majority of American taxpayers take the standard deduction rather than itemizing deductions for expenditures such as mortgage interest, charitable contributions, and state & local taxes. The standard deduction increased to $11,400 from $10,900 (up $500) for married couples filing a joint tax return, increased to $5,700 from $5,450 (up $250) for singles and married individuals filing separately, and increased to $8,350 from $8,000 (up $350) for heads of household.
- Overall Tax Bracket Thresholds – Increased across the board for all tax filing statuses. This means that if your annual income did not increase since last year or if you did not receive an inflation based pay raise, you may likely pay a little less in taxes in 2009 than in 2008. As the IRS notes as an example on one of its press releases, in regards to a married couple filing a joint return, the taxable income threshold separating the 15 percent bracket from the 25 percent bracket is $67,900, up from $65,100 compared to tax year 2008.
- Earned Income Tax Credit – Increased to $5,028 from $4,824 (up $204) for low and moderate income workers and working families with two or more children. The income qualification limit to take the earned income tax credit (EITC) for joint return filers with two or more children also increased to $43,415 from $41,646 (up $1,769).
- Annual Gift Tax Exclusion Amount – Increased to $13,000 from $12,000 in 2008 (up $1,000). Often overlooked by people, the gift tax requires the gift giver to pay a special tax on the gift amount if it exceeds a certain amount per year. For 2009, that threshold will be bumped to $13,000.
- Social Security Contribution and Wage Benefit Base – Increased to $106,800 from $102,000 (up $4,800). This means that 2009 income sources over $106,8000 will not be subject to Social Security taxation. With the Social Security tax rate at 6.20%, this also means that the maximum a person will shoulder in Social Security taxes for 2009 is $6,622.
- Traditional and Roth IRA Contribution Limits – No change from 2008. Despite inflationary pressures that increased tax bracket rates across the boards, sadly, IRA and Roth IRA contribution limits will be staying the same – stuck at a crappy and paltry $5,000 per year for those under age 50, and $6,000 per year for those 50 or above.
- Roth IRA Contribution Limits (Income Threshold) – Increased to $166,000 from $159,000 (up $7,000) for married filing jointly couples, and increased to $105,000 from $101,000 (up $4,000) for singles and others.
Watch Out For Possible Upcoming 2010 Tax Bracket and Tax Rate Changes
While official IRS federal income tax brackets are not usually released for the following tax year until the late fall, it’s frankly never too soon to get your hands on the earliest reliable marginal tax bracket predictions. Year after year, a group of private tax experts and economists associated with the Wall Street Journal get together and crunch officially released inflationary data to provide news readers an early bird peak at the following year’s projected income tax brackets. This group, comprised of members from the Tax and Accounting arm of Thomson Reuters, tax analysts from CCH, and an accounting professor from Northern Illinois University – usually releases their annual tax bracket projections and estimations on tax deduction numbers for the following year during early fall (around September), well before the official IRS numbers are issued.
As marginal tax brackets track changes in inflation and other economic data fairly closely, the annual tax rate estimations by the Wall Street tax team members have yielded pretty reliable and on par results over the years. If you’re antsy to get a head start on tax year 2010, stayed tuned in very early Fall 2009 for the newest updates on the 2010 projected federal income tax brackets.
Because of the election of Barack Obama as the new President of the United States and the handover of the country to a new political party, there are bound to be substantial changes in the tax code and income tax rates in the coming years. Working on an economic stimulus plan and advocating aggressive social agendas, President Obama has already proposed numerous changes to the ordinary income tax rates, such as raising the top rate from 35% to 39.6% – potentially boosting the tax burdens of higher income earners to new heights. He has also suggested the need to reduce tax deductions for American households earning more than $250,000 annually, and has also made proposals to increase taxes on capital gains and stock dividends. With a political and taxation platform that is decidedly against those those in the higher upper echelons of the U.S. tax code, those who have done well for themselves over the years seemingly have a lot to fear in Mr. Obama. Personally, while I feel Obama is doing a commendable job on the social and foreign policy front, I hope he doesn’t get too carried away with his taxation ambitions. His remarks on taxes always make me nervous.
In the mean time, many of us regular taxpayers can only just ride along and hope for the best. Regardless of what Obama ultimately decides to do and no matter how federal income tax brackets eventually look like in 2010 and 2011, we should try to wisely structure our actions today to reduce our future tax burdens as much as possible, regardless of what happens. Such smart tax moves would include taking advantage of employer sponsored pre-tax perks like flexible spending accounts (FSA), and investing in tax deferred retirement vehicles like 401(k)’s and Roth IRA accounts.
April 22nd, 2009 at 10:27 pm
Ugh I hate paying taxes with a passion! After paying my 2008 taxes, I can’t stand to even look at the new round of taxes for 2009. The Obama government’s wasting our money on these useless bailout packages instead of sending us economic stimulus checks for consumers. When will it be our turn to get bail out? Those of us suffering and unemployed need help too!
April 22nd, 2009 at 11:44 pm
Daniel, allow me to share with you some of my thoughts about taxes and government. I was going to write a personal finance blog post about it…but I guess I can stick it here as a comment….
By no means am I a federal income tax apologist, but while I abhor taxes as much as the next guy, I also understand the underlying reasons why we pay. Underneath the agony and frustration of having to fork over your hard earned money in the form of taxes to Uncle Sam, there is a blessing in disguise. We should all feel blessed and fortunate to have the opportunity to live in this great country, and the ability to work honestly, and pay one’s due.
Many of us Americans hate paying taxes with a passion, but as someone who has visited less developed third world countries before, I think we ought to be somewhat grateful that our taxes wind up going towards productive uses – the majority of the time. Those who live and work overseas, and pay taxes to a foreign government frequently never see any return from the taxes they pay in the form of improved law enforcement, better ambulatory care, better roads and bridges, or even social service benefits. Oftentimes, the money simply disappears into the back pockets of corrupted government officials. At least in the United States, despite our complaints, our tax money counts for something most of the time. Yes certainly there are occasions where tax funds are wasted and spent on crooked pork barrel projects, fruitless industry bailouts, and other useless endeavors, but much of the time, our taxes are used to help fund reliable societal infrastructures such as critical 911 emergency services, subsidized public education for our children, and improved national defense and security. Just one successful emergency response from 911 may be worth a lifetime’s worth of taxes paid. Many of us who have not had the opportunity to experience the other realities in lesser parts of the world take many of these government provided social perks for granted.
But as I discussed in a past post about tax evasion and tax avoidance, while it is our legal duty to pay accurately assessed taxes, it is also within our full right to utilize whatever legal means at our disposal to reduce our individual tax burdens as much as possible. Because “the only things certain in life are death and taxes”, it’s best for us to confront every year’s tax burden with as much early strategic planning and foresight as possible…which is why I am so interested in early federal tax bracket projections…
April 23rd, 2009 at 6:31 am
Are these the official IRS 2009 federal income tax brackets or are these merely projected estimations? I know the IRS has officially released these numbers already, but is that it?
Is there any chance that President Obama’s upcoming legislations and economic proposals result in major tax bracket changes for the upcoming 2009 year…or are these tax bracket rates set in stone at this point? Can any tax experts out there help answer this question for me?
April 23rd, 2009 at 6:50 am
Saran,
The posted tax rates, income numbers, deductions, and federal tax brackets listed above all represent official IRS numbers. Any future changes in the U.S. tax code by Obama and friends will be reflected in future 2010 and 2010 tax brackets than the upcoming 2009 tax year. Besides, it would be patently unfair for the federal government to alter the tax code in mid year and not allow the American public the opportunity and sufficient fair warning to properly structure their tax life ahead of time to comport with tax regulation changes.
April 25th, 2009 at 2:18 pm
Why didn’t President Obama authorize an increase in the Roth IRA or the regular IRA contribution limits? Why do they even place a cap on these contributions. Why don’t they increase the cap higher to something like $10,000 or even $20,000 a year….why limit the Roth contribution to a mere $5,000? I don’t understand the government anymore. ~~Frustrated in Georgia
April 29th, 2009 at 12:06 pm
A very good question I’ve always wondered about. At least for the debt-laden crowd, which I’m concerned with giving advice to, making the contributions while revolving credit card debt is one of the bad ideas.
May 1st, 2009 at 5:35 am
I have no idea why contributions limits for the Roth or IRA were not increased to comport with inflationary changes. But I suspect the government’s trying to implement plans to stimulate greater consumer spending not promote greater retirement savings at the moment. Makes some sense I suppose – we are still in a global economic recession at the moment.
May 7th, 2009 at 3:47 am
So it looks like the WSJ experts and tax projection pundit heads release their 2010 federal tax brackets in early Fall – early September 2009 perhaps?
Any idea what Prez Obama plans to introduce into the new tax code for 2010 and 2011? His Robin Hood talks of robbing the rich and giving it to the poor frankly alarm me. I’m all up for helping the less fortunate, but not at the expense of destroying our capitalist system. What are we, the Soviet Union?
May 12th, 2009 at 8:31 am
Can someone help me out with a couple questions?
1.) Obama is in one breath saying he is going to let the Bush tax cuts expire. I think he mentions the top 2 income brackets in this comment. THEN he says in the next breath that people who make under 250K will not see their taxes go up one cent. So what am I missing here? The top 2 income brackets are starting at 208K.
2.) Next question??? When it says “taxable income”, is that my gross or my adjusted total after my deductions?
I’m trying to see how much I can make this year without being in the targeted group BUT I don’t even know what it is since he is talking out of both sides of his mouth on this.
Thanks!
May 13th, 2009 at 5:29 pm
“Taxable income” is ALWAYS the amount upon which your tax liability is calculated, i.e., AFTER your deductions and any credits are applied.
Regarding Obama’s tax plans, we have ALREADY seen a tax cut implemented for the majority of workers. In fact, those reductions were required to be implemented by employers in their employee tax withholdings by April 1 of this year. If you are an hourly or salaried employee making less than about $250,000 annually, you should have already seen a slight increase in your take home pay already, due entirely to that small tax cut.
As far as Obama “talking out of both sides of his mouth on this,” I suggest perhaps you are listening to some shaded information. Are you a Fox News devotee by any chance?
May 14th, 2009 at 5:56 pm
Thanks Steve
When you are talking about a tax cut, are you talking about that $8 a pay they were were talking about?
Soooo, what does Obama mean when he says that for the top 2 brackets they will see the Bush Tax cuts expire? Wouldn’t that include people making under 250k? The 2nd highest tax bracket begins at 208K. To me “raising taxes and letting tax cuts expire” are the same thing. I am going to be bring home less. What am I missing here?
And NO I am not a Fox devotee. I work 14 hr days. I have no time to watch any news. What is the problem with Fox? I hear Obama talk about them all the time. They seem to be feared for some reason. Very Odd.
Thanks
May 15th, 2009 at 11:08 am
Hello, Jenny:
Well, this discussion could obviously get fairly involved. And I wouldn’t mind that at all, except that, like you, I work fairly hard for my living and time is limited!
Last things first. I don’t think anyone “fears” FOX News. I don’t know why they would. Similarly, I don’t know why anyone would be so concerned about “the liberal media” or MSNBC or CNN or Rush Limbaugh or any other entertainment or opinion or news outlet. I believe nowadays most all of them are all biased to one degree or another and it’s only a matter of how much they show it. Jim Lehrer’s news hour on PBS may be one of the few “clean” news shows left anywhere.
Still, the light of day is the best thing for all these views. The more people talk, the more we can all see what they are really about, long-term. That’s the beauty of freedom of speech.
I think it’s been made abundantly clear that Fox News has taken direction from elements of the Republican Party to provide “talking points” on Republican issues throughout their programming. For example, although all the anchors vehemently denied any interest in promoting the recent “Tea Party” protests, saying they were only “reporting the news,” the fact is the whole thing was mentioned many, many times on their programming over the course of the last couple of days leading up to it. This was done with great anticipation and excitement, including many promotional ads on-air regarding all the on-the-spot coverage Fox was going to provide at various locations.
Regarding Obama’s statements about the top two tax brackets, I personally have not heard him say that. Since I haven’t heard that myself, and therefore don’t know the context, I will defer to your knowledge on that topic!
Regarding the INITIAL tax cut, mine equated to around $30 every two weeks. All I can say is, I’m glad to have it, but I’d also be very happy to forego it if it would help reduce the annual federal deficit.
Regarding letting a tax cut lapse being the same thing as a tax increase, I think our differences are bacisally semantic in nature on that topic.
Let me just say I am a fiscal conservative, but with a social conscience. I have been a dues paying member of the Concord Coalition for decades now. You should visit their web site some time if you are interested in receiving unbiased, non-political information about the federal government’s spending and its impacts on generational issues. Their web address is http://www.concordcoalition.org
For now, Peace! And don’t work TOO hard. I made the mistake of not allowing a proper balance in my own life for years. Be certain you know what you are chasing, and why.
steve
May 19th, 2009 at 5:10 pm
Prez Obama needs to cut taxes for everyone rather than picking and choosing. We need to all stop pointing fingers accusing each other of being communist, socialist, or whatever, and get down to the business of stimulating this economy. The best way is to lower taxes for low income, middle income, and small businesses so that they start hiring again. Low taxes should be lower taxes for everyone, not just a chosen slice of the population. No more games…let’s get those federal tax brackets back down and keep them low.
And no…I’m not a Fox News devotee either, but I do enjoy their programming. MSNBC has a tendency to irk me. CNN is more moderately acceptable. But I guess television programming is inherently biased depending on who’s running the show. The bias swings both ways.
May 19th, 2009 at 5:30 pm
Yes, the bias definitely swings both ways, as I said myself. Even you, Elaine, admit you prefer Fox over some of the others. Swap “Fox” for “MSNBC” in your own sentence, and you’d be speaking for me. So we all have our biases. The key, as you mentioned, is to work through those differences for the overall good.
I’m about as bi-partisan as it gets nowadays. I referenced Concord Coalition as being a favorite organization of mine. Visit them, and you will see what I mean. I’m a pragmatist. I want what works.
One question, tho’. How did the tax cuts of the Bush presidency “stimulate” our way to MORE than doubling the national debt (from around $4.3-trillion when he and the Republicans took control, to over $10-trillion when they left)? In my opinion, tax cuts are over-rated, relatively speaking, as a means of stimulating the economy and spurring growth. Even in the most highly taxed regions of the developed world they have growth. Productivity, as an example, is a much stronger influence on growth than mere tax cuts.
But wanting tax cuts is “easy.” Everybody would like to keep more of what they earn, myself included. I just don’t believe that’s all there is to it.
May 24th, 2009 at 11:10 pm
Taxes are great. They are the main contributions that are made the the US communist parties that actually run the show in Washington D.C.
May 24th, 2009 at 11:29 pm
Frankly I don’t care who runs the show in Washington D.C. It can be the Democrats with President Barack Obama at the helm or the Republicans with (Insert one of: John McCain, Rush Limbaugh, Dick Cheney, or Michael Steele), or even the fledgling Communist party of the United States. It wouldn’t really matter to me on a day to day level. What really matters to me and to most people is the amount of money that we get to keep in our pockets and how we are allowed to support and take care of our families. In this rough economy, we must get lower taxes. Either that, or some form of economic stimulus check payment (like the one we received in 2008 – only for a much larger amount).
Lower federal taxes will stimulate this economy – I guarantee you. I don’t want any more funny tax bracket shifting games by the administration and Congress. Lower taxes for all right now and do away with the pointless games.
May 28th, 2009 at 10:30 am
Richard, we could argue about the impact of lower taxes. I don’t believe anything is “guaranteed.”
However, in my opinion, this economy does not need more stimulus at this point. The ship is turning. Look at Treasury rates. The yield curve is beginning to steepen dramatically. The yield on the 10-year is up around 25% in the last month, while the 1-Year has remained relatively constant. New home sales volumes are stabilizing. New jobless claims are dropping. Durable goods orders are picking up. Inventories are falling.
As for who’s in charge, I don’t much care, either, so long as the public good is being served. However, we have a continually exploding national debt. You know, the one that increased from around $4.2-trillion when George Bush and the Republicans took power in 2000 to over $10-trillion in early 2008….by far the most explosive growth in the national debt in our nation’s history. This WILL lead to higher interest rates, competition for available capital, and potentially significant inflation…..a much more depressing prospect for the economy and your and my wallet over the long term than mere taxes. The annual deficits and the burgeoning national debt are this nation’s next big problem, and we’ve got to address it. It will require comprehensive changes in entitlements, as well as prudent investments in cost-saving technologies.
In my opinion, now is not the time to be cutting federal income taxes dramatically.
May 29th, 2009 at 5:54 pm
So what do you guys think about the upcoming 2010 federal tax bracket projections in the fall? Do you think Obama and the Dems are going to keep tax rates as they are now or are they going to drop for us middle class types. Isn’t he supposed to jack up the tax rates on the poor so that us ordinary little people can have a chance in this economy?
I certainly hope so. The rich and privileged few have ruled this country under Bush for far too long. It’s time they paid up!
May 31st, 2009 at 12:23 pm
Well at least Obama realizes that dire situations require dire methods, even if it requires turning his back on his old campaign promises. I’m sure his obsessive supporters won’t care either way since Messiah-Obama can do no wrong, but it looks like ole Obama won’t be repealing the Bush tax cuts anytime soon despite his former promises that he would do so. After all, promises aren’t important after you’ve actually won the Presidency right?
As people may know, the Bush tax cuts had heavily favored the rich. In what is pretty much an acknowledgment of the serious situation and realities, Obama is leaning towards letting the Bush tax cut for the wealthy expire on schedule in 2011 rather than repealing it sooner, which in essence is effectively delaying any tax increase for the rich while he gives his stimulus plan a chance to work. Great move for the Republicans…but disappointing for Dems who wanted marginal tax rate efforts to be shifted more to the rich sooner than later.
June 2nd, 2009 at 12:16 am
President Obama’s new tax brackets as proposed (according to the Wall Stree Journal) would create a new 36% rate and would apply to an adjusted gross income of $250,000 less the standard deduction and two personal exemptions. And yet, with all of the supposed hissy fit fuss about the catastrophically future high tax rates, the highest marginal tax bracket rate under the newly proposed Obama plan would only be 39.6%.
That’s not too bad. Besides, rich people deserve to pay their share. It’s time those who can afford it get fleeced for a change instead of us regular Joes and Janes getting hammered.
June 15th, 2009 at 2:27 am
In case some of you have been asking when the Obama income tax changes for higher income taxpayers will take place, they are slated to not take effect until 2011 – still quite a long ways off! So relax
The Pres has proposed raising the top two IRS tax brackets. The current 35% top marginal rate on ordinary income would rise to 39.6%, and the 33% rate would increase to 36%.
Obama has also proposed new limits on itemized deductions, and suggested that the top rate on long term capital gains and most dividends would rise to 20% from 15%. These plans are designed to affect upper income Americans only, described as families making more than $250,000. So ordinary people should be all right. Stay cool people
June 24th, 2009 at 2:16 pm
“..boosting the tax burdens of higher income earners to new heights.”
That’s malarkey. What Obama proposes is still a lower tax rate for the highest earners than 75% of the Progressive Tax Systems century of historical usage.
39% is also what Ronald Reagan averaged during his tenure. (He did inherit high and drop lower, but then put us deep in debt…like George did.)
Your not so veiled attempt to portray Obama as a socialist is even more criminal when you add the fact that you know these things as well as anyone.
A progressive tax system helps the middle class, who are the true engines of the economy. Otherwise you get Mexico.
June 26th, 2009 at 3:35 pm
I believe President Obama is CORRECT when he said that the income tax should be raised on anyone making over $250,000. It also should consist of two brackets and anyone making over $1,000,000 should be in the second bracket and it should be starting with the 2009 tax year and not 2010. Otherwise, the middle class will LOSE CONFIDENCE in President Obama. All I hear, up to now, is the sacrifices that the middle class are going to have to make. The people that one reads about in the Forbes 400 magazine are all billionaires and I read in BUSINESS WEEK that at UBS Bank in Switzerland, there are 52,000 accounts from Americans. It seems to me that Neil Barofsky does his job, he’s going to find out the problem is a lot worse than he ever dreamed of. They’re no reason why the TARP bailout should cost the taxpayers $3 trillion. The government seems to be dragging this out and the longer it goes on, the worse President Obama will look.
Yours truly, Disgusted Middleclass Taxpayer, Public Citizen and AARP Member, LaVern Isely
June 27th, 2009 at 12:31 pm
Complain about paying taxes all you want, but always keep this in mind: the only thing worse than paying taxes is not having any income on which to pay taxes.
Keep that in mind next time you have to file yours. Having to pay tax on your income is one of those “problems” that many people (especially lately) would gladly trade you for theirs.
June 27th, 2009 at 4:21 pm
Karl, I will glady pay taxes to provide for those who CAN’T work and for the Vets and the Seniors. BUT I am sick of paying for all the lazy a$$’s who won’t work and all they know how to do is lay on their backs and reproduce.
June 30th, 2009 at 5:05 pm
Can you advise the status of Obama’s campaign promise of no income tax for seniors earning less than $50,000?
July 5th, 2009 at 12:53 pm
I also support the concept of taxes. I have lived in numerous other counties and have seen what happens in socities without a tax base. Not for me. I am now sarting to believe that our taxes have not kept up with the explosion of incomes we have seen over the past 10 years. I no longer see America as a wealthy nation. I see America as a nation of some very wealthy people. Just look at our cities our roads etc. We as a nation are broke. I read last spring that if congress did not fix the ATM an additional 7 million tax returns would be have been caught by this tax. Thats 7 million more in just one year making 250k plus
Again a broke nation of wealthy people.
July 7th, 2009 at 4:23 pm
Do I enjoy paying my heating bill? NO
Do I enjoy paying my water bill? NO
Do I enjoy paying my internet bill? NO
Do I enjoy paying my phone bill? NO
Do I enjoy paying my grocery bill? NO
Do I enjoy paying my monthly mortage bill? NO
Do I enjoy paying my car finance bill? NO
Of course I don’t like to pay these bills . . . but I do, without fail.
If I chose not to pay them, they’ll shut off my gas, turn off the water, internet and phone service, take my house and car away and I’d go hungry.
I pay them because I’m responsible for them and I want to continue to live a decent lifestyle in this country.
I am a proud citizen of the great country.
It’s MY country and I truly believe I’m responsible for it.
Do I enjoy paying my TAXES? NO, but that’s how I help pay this countrys’ bills.
Cheers to all of you who had something to compare to by experiencing living in a foreign country.
July 8th, 2009 at 2:49 pm
I would consider myself conservative, and I would agree with the above about paying taxes…. we have an infrastructure and way of life that we want to preserve, protect, and keep clean…. and it costs money. The only problem I have with the tax system is that half the country pays for the other half…. Even people making $30,000 should pay something…even if it’s only $100 (0.33% of their income).
July 13th, 2009 at 3:37 pm
I stumbled across this conversation, definitely interesting. I think it represents a relatively quiet majority of Americans…not D’s or R’s. I agree that paying taxes is part of our duty. Where I begin to be challenged is the definition of “fair share” and the relative inefficiency of government. Let me explain;
I often hear folks talking about taxing people making over $250k as fine. The rich need to pay their fair share. How much is fair? Today, the top 5% in terms of income pay something like 80% of the taxes. When is it too much? Is it too much at 39% of your income? 50%? When does it no longer pay to work hard and earn as much as possible? That is a challenging question.
The other issue I have is around Government efficiency. Would you give to a charity where 50% of what you gave went to the charity’s overhead? Well, that is about what goes on when you “give” to the Government. There are some areas of necessity, like the military and roads, but other than that, there is not much the Government does well.
I guess I am not sure I see many examples of where the Federal Government actually does something well. Our politicians don’t even read the bills and only worry about how it impacts their next election. If I had my way, we would vote every incumbant out of office. We need to break free from the old guard power brokers.
July 20th, 2009 at 5:26 pm
What about the millions of people collecting unemployment that are going to be screwed because of insufficient withholding practices, not being able to have more than 10% withheld?
Since it’s taxed just like income, you are going to have a LOT of broke people owing a LOT of money next April – because the money just is not enough to pay taxes on top of other important financial obligations.
July 24th, 2009 at 1:25 am
Do you guys realize that when you raise taxes on the top earners that all they are going to do is hold onto their money even more or send them over seas? They will then stop investing in jobs because they cant afford to do it and maintain a profit. Most of these top wage earners are YOUR BOSSES! Think about it. They pay YOU. If they are taxed more, then you will earn less because they want to collect a profit as well. Think about it as if you are in their shoes. I have no problem with paying my fair share in taxes as long as my money isn’t going to crap. People who live in public housing, have expensive cars sitting in front of their house, living off of our hard earned money, then sticking their hand out for more after they have 6 more kids. Then a majority of THOSE kids see that they can sit on their ass and do nothing for money, it is just given to them. Bush spent us into oblivion during his terms and then Obama is going to triple that. None of the stimulus money is going to work, the cap and trade is going to cause this country even more heart ache, then the proposed universal healthcare will then bankrupt us. C’mon people, wake up! These people in our government, both Rs and Ds, are screwing this country up every day. We dont need anymore spending. They have already spent money WE DONT HAVE!!
July 28th, 2009 at 9:02 pm
Let me first of all clarify some semantics when one refers to “taxes” before I get into whether or not taxes are necessary. Taxes on gasoline pay for infrastructure like roads & bridges. Medi-Medi taxes pay government insurance companies & those under which, need care that they provide. Income tax is the majority of what we pay out of our pockets every year. Income tax is not paid to the treasury: it goes straight to the Federal Reserve. This would all be good if the Fed was transparent & there was as much apportionment as we are required under penalty of force (not statutes or regulations) to denote when handing over a percentage of our hard earned dollars each year.
The Fed has never been audited, it’s books are closed. No citizen can see where the income tax goes. The truth is that it goes directly to the Federal Reserve to pay off interest that we owe on bonds we effectively sell to the Fed to get the several billions in bailouts. The treasury will print these bonds (if not done electronically) & the Fed will buy them by printing (or adding ones & zeroes to their server) dollars to be put into the pool of circulating currency.
It is no surprise that when there is more of something then each component is worth less individually. If the Federal Reserve prints money out of thin air & adds to circulation, the dollar is debased & inflation occurs. The cost of living goes up as inflation sets in, but the last component of the economy to catch up to the new inflated standard is the wages.
It is against the Constitution to allow any other entity to coin currency other than the congress. The Federal Reserve is a private central bank that is not held by any accountability or oversight by any government entity. It is the Fed that sets the interest rate & creates inflation. It is also never defined in any clear way in the tax code or supporting regulations & statutes (laws & means to enforce them) that “taxable income” is domestic income earned by a US citizen. It is essentially voluntary, but may be punishable by imprisonment, fines & property seizure. There is NO law.
I have no problem paying taxes for police, healthcare, infrastructure, etc… But to pay blindly up to 35% of MY money to cover a never-ending cycle of debt that only aids the debasing of the worlds reserve currency to the point that it is near collapse is unacceptable.
I encourage, nay, I implore any that reads this to do your own research. You don’t have to go to cnn or fox, or even infowars. All that matters is that you realize it for yourself. Nothing convinces more than the truth. Even if you open your wallet or reach into your pocket & pull out a dollar, it says that “this note is legal tender for all debts..” It does not denote currency, it denotes debt. If all debts were paid, there would be no currency in circulation. The interest owed to the Fed can never be paid off. Debt = slavery.
August 2nd, 2009 at 9:59 pm
WOW…..I have been reading A LOT on the web lately. I have also been a non resident for the past 10 years. I watched, in awe, you all elect ?????? someone from ?????somewhere, that knows???? something about ?????? and immediately after you elected this ???? you all owe 1 added trillion dollars to what you already owed.
In the morning, after reading all what I have……I am changing my holdings to ANYTHING other than the dollar….The Mexican Peso will soon be worth more…
mark the words…the end is near…for sure.
August 4th, 2009 at 9:24 am
Wow… I love the comment where raising the top rate to 39.6% wasn’t “that much” and how it’s “only fair”. Sure doesn’t seem fair to me, and no, I’m nowhere near that bracket. You can’t just keep raising taxes on the rich to make up a shortfall. All we’ll do is cause a mass exodus of the wealthy, then we’ll really be screwed. You do realize that taking wealth from the rich and giving it to the poor is basially communism, right?
I have seen this unequal taxation from the inside and all it does is cost us, the middle class, in the end. I did all the accounting for a small business for years that had gross receipts of several million dollars. The owners were always trying to grow and expand their business. When income and business tax rates increased, it cost them around $75,000 a year. Did they cancel vacations, or sell a boat or car, or change their spending habits? No…. they downsized their expansion plans and let two employees go.
That’s the net effect when you raise taxes only on the wealthy and businesses. What doesn’t seem fair to me is that we have something like 60 million people in this country that pay no taxes AT ALL.
The REAL problem is that our tax money is used unwisely and unefficiently by our government almost to the point of criminality, and their solution to make up for it is always taking more.
August 4th, 2009 at 2:32 pm
President Obama’s proposed national health insurance for all, particularly for those who don’t even work and aren’t covered by health insurance will greatly jack up federal tax rates for all. Don’t believe the fantasy that the governmental national health insurance plan can be easily paid by a stiff tax increase for just the so-called wealthy types (those with incomes in excess of $250,000). If there’s a tax increase, the tax bracket rates will increase for middle class people as well. Sure, raising taxes on the middle class doesn’t make sense in this recession, but it’s the only way the federal government and Obama will be able to pay for his aggressive socialist agenda.
Governmental tax coffers and tax revenue have already dropped due to plunging American wealth so a tax increase across the board is the only way they’ll be able to pay for all of the projects. I’m sure Obama already regrets making the promise that middle tax rates won’t increase. Rest assured, he will be breaking this promise with the American people very soon. But then Obama, who is a typical trained lawyer is the ultimate spin meister and he has a loyal and diverse group of crazy Obama fanatics who believe he can do no wrong.
August 4th, 2009 at 3:11 pm
The current top marginal tax rates are nowhere near as high as they have been in the past. Taxes are not “always raised.”
At least 2/3 of the projected costs of the current health care proposal would be funded by savings elsewhere. The final version of any health care legislation is far from transparent at this point. What we have is a whole lot of people finally giving serious and spirited consideration to health care reform in this country. I classify this as a good thing.
Simply put, in America, we spend a minimum of twice as much on health care (measured as a percentage of gross domestic product) than any other industrialized nation. We pay the highest costs for most prescription drugs of any industrialized nation. Small businesses are being forced to reduce benefits and perform cost-shifting to place more of the burden for health insurance costs on employees. I know this to be a fact, as I am a small business owner employing 54 people at present.
If I maintain coverage for my employees at escalated costs, who really pays for that, ultimately? Surprise. It’s the people that utilize my company’s services. You.
That is the equivalent of a hidden tax hike on every consumer. You are already paying “increased taxes” hidden as a portion of the goods and services you buy every day.
Consider the continuing upward spiral of increased costs for health insurance and out-of-pocket health care costs in this country. Then consider that either way, you, as a consumer, are paying for those cost increases already….either in increased costs of goods and services, or as direct out-of-pocket expense.
The current trend is unsustainable.
August 6th, 2009 at 2:17 pm
As an Irish taxpayer having been exploited by the gross mismanagement of Irish finances since 1997 I have to say that the US tax regime is significantly more fair than the Irish one – the rates of tax paid and the bands across which the taxes are levied certainly seem to provide US taxpayers with more disposable income per Euro/Dollar earned, and the application of the taxes collected is (arguably) also more sensible than that employed by the Irish Public Representatives.
At least in the US, hard work is rewarded and people seem to contribute to the public purse in proportion to their income levels, unlike here in Ireland, where the combination of a minority of wealthy individuals and a broad range of people who defraud the system are supported financially by hard working middle-income earners who are taxed at exorbitant levels, to the detriment of their own families and living standards.
US citizens, be grateful for living where you do, and for the fairness of the system that is applied to you.
August 7th, 2009 at 10:05 am
I’m a bit worried about our taxes this year. I know that they changed the way they deduct federal income tax from paychecks. Due to the frequency of my paychecks from one job, and the smaller amounts my second job, and the low amounts my husband makes from his two jobs, we rarely see Federal income tax deductions on our paychecks.
My worry is that this is going to come back and bit us when we file our 2009 taxes in April of 2010. Are the federal tax rates going to be adjusted to reflect the change in paycheck deductions, or is all that money the government let us keep from our paychecks going to need to be paid back?
I’d like to get some concrete answers now, so that we can plan for tax day, and possibly change our exemptions for our paychecks so the Fed gets their cut before tax day and we don’t have a huge tax bill! I’m not concerned about getting a refund, but I don’t want to have to pay either!
August 15th, 2009 at 9:46 am
that was bush adminstration that gave money for the bailout you dummy.
August 15th, 2009 at 11:40 pm
Hey why dont you chill out and leave her alone.
August 26th, 2009 at 9:23 am
Steve, you are shortsighted and dangerous! Especially the part about taxes at the top aren’t nearly as high as they once were. Well, income tax itself used to be zero in this country if you want to go back far enough. Look it up with one of your fancy search engines. Start with something like: when did the income tax start in the USA. You might get something back like: In 1862, in order to support the Civil War effort, Congress enacted the nation’s first income tax law. Most people paid about 3%. Funny how you choose points in histroy that support your viewpoint and ignore hundreds of years of history where the tax rates were MUCH lower or even zero. Short-sighted and dangerous indeed.
August 26th, 2009 at 9:56 am
John, quite apparently you read one line from one of my posts and chose to label me based on that single line. I don’t play that sort of game.
In my opinion, it’s people like you who are “dangerous” because you have no interest in discussing anything to any degree of detail. You seize on a bullet point and proceed to use the anonymity of the internet to label and call names.
The fact is that tax rates at the top HAVE been much higher than they are now. That is a fact. That has nothing to do with the fact that at one time income taxes didn’t even exist. It’s a non sequitur.
I know the history of income taxes. I don’t need your pious history lesson.
August 27th, 2009 at 2:13 pm
Steve, you have way to much time on your hands. GET A LIFE!!!!
August 27th, 2009 at 2:25 pm
Actually, you have no idea how little time I really have. I run a company of 54 professionals and average around 55 hours per week in the office, Monday through Friday only of course.
The weekends are for “life”! :^)
August 30th, 2009 at 3:04 pm
I am completely broke and love life 24/7 and pay taxes with the wife. None of us has health insurance. We can barely make mortgage and pay bills. The one thing we do have is a little tiny biz that just gets us by. I am thrilled that we are allowed to work harder rather than be expendable. What a great country! Remember the country is the people. Shut out media and follow your instinct. You will all be fine. As f’ed as things are each us us can still face fear in our own way.
By the by we have no family to fall back on. No place to go. There is just US. Get it. Stop trying to beat the system be one! Life owes you nothing beyond what you make of it.
August 30th, 2009 at 3:06 pm
Darn I made a typo. “each us us” should read “each of us”
August 31st, 2009 at 11:58 am
Speaking of tax increases….
I’ve been researching whether it will be beneficial to cash out 401K and pay of my mortgage now…. and thought I’d share what I found….
It shocked me. I don’t think our generation knows how good we have it as far as taxes go. Some say history is a cycle. If that is true, we are in for a rude awakening when the cycle turns again. (SEE BELOW)
With the deficit and economy the way it is now….high taxation is inevitable for everyone.
I chose Married Filing Jointly and the $100, 000 – $150,000 tax bracket. That tax bracket range did fluctuate over the years, but this gives a general idea.
HISTORY OF FEDERAL INCOME TAX RATES
1927-1931 25%
1932-1935 56%
1936-1940 62%
1941 69%
1942-1943 85%
1944-1945 92%
1946-1953 90%
1954 89%
1955-1963 81%
1964 71%
1965-1978 66%
1979-1981 64%
1982-1986 50%
1987 39%
1988-1990 28%
1991-1992 31%
1993-1996 36%
1997-2000 31%
2001-2002 30%
2003-2009 28%
*The above is 82 years of US Income Tax History
*For 52 of those years, the tax rate was OVER 50%…and that is NOT the highest tax bracket
*For 21 of those years, the tax rate was OVER 81%…and that is NOT the highest tax bracket
*For 13 of those years, the tax rate was 28%, which is what it is today and has been since 401ks’ started in the 1980’s.
If history goes in cycles, as most agree that they do, our 401K/IRA’s may have future tax consequences beyond our wildest imagination. No wonder the government totes them so much.
10% penalty? Might be worth thinking about and having control over your future. We’ve already lost enough in the market and there is no guarantee for the future. However, I can bet that future taxes have a huge possibility of suffocating ANY future returns.
Here is the PDF to confirm the information
http://www.taxfoundation.org/files/federalindividualratehistory-200901021.pdf
September 15th, 2009 at 3:02 pm
Stef,
While I agree with conclusion, it is based on misleading info. Clearly, income not indexed to inflation. If you made 150k in the 40’s, you’d have the purchasing power of a multimillionaire today. Erock says it best, tax discussion is meaningless because of irresponsible spending. Tax rates will increase to service the higher debt costs once the credit quality of the US is seen for what is really is. It is laughable that some of these posters are taking the healthcare debate projections as fact….and the Iraq war was supposed to cost less than 100B not to mention the greatest ponzi schemes in history Social Security and Medicare are supposed to be self funding…Its like Bernie Madoff “investing” your dollars in a nice steak dinner. Ask yourself why there is no discussion about the econ 101 tenant of supply of “medicine” in this “false” debate? Any effort at price fixing of medical costs will destroy industry and reduce quality. Instead, break the monopoly of AMA and allow medical industry to grow according to the free market. Government has already price fixed and wounded the long term healthcare industry. Honestly, a better investment for the government to bend the “cost curve” would be to throw all that money into subsidizing tuition for prospective medical professionals, but that’s a whole other discussion about government distortion of any market..i.e. mortgages.
September 22nd, 2009 at 10:46 pm
Ron (Paul) from July 28th, 2009 at 9:02 pm is exactly right regarding Tax and the Federal Reserve. What a farse! Bail out corporations to the tune of trillions?? Granting bankruptcies like it’s giving out candy?? It took billions of dollars to fuel those air-craft carriers, tanks, jets, hummers, feed those troops all in Iraq. You can’t just loosen money for a war only, that’s impossible; you have to lossen it for everyone. So we got our ultra-expensive war and $300k+ home loans to people making $30K year!! Say what?? The Federal Reserve flooded the World Economy with it’s own printing press paper money and has clearly de-valued the U.S. dollar possibly beyond recovery. Gladly pay taxes to a bunch crooks and thieves hiding behind un-audited, no accountability doors. Do you people realize there was no central bank (federal reserve) in the U.S. prior to lets say 1905. The richest, wealthest men of the time created the idea of the central bank and convinced newly elected President to allow it. By the way check out “Audit the Federal Reserve” legislation H.R. 1207 and Ron Paul’s website at http://www.ronpaul.com/
September 22nd, 2009 at 10:56 pm
Hey Jerry,
The election is over. Ron Paul and McCain never had a chance. Time to stop looking into the past and start looking to the future. President Barack Obama is our head of state now and it’s time we throw our support behind the guy who has what it takes to fix our broken system and get the corruption out of Washington DC for good. Strict regulation of the financial system and more jobs for the people is what we need. We also desperately need universal health care for all as health care is a human right!
September 22nd, 2009 at 11:38 pm
This isn’t about elections. In fact I didn’t even realize Ron Paul ran for vice-president during the election. I just found out about him recently. Whether or not Obama is willing to help end the Federal Reserve I don’t know, but this isn’t about politics, it’s about ending a private organization’s (federal reserve) control over monetary policy in OUR country. Why should it be allowed that the central bank go un-audited? “Strict regulation of the financial system” is exactly what H.R. 1207 is. Obama suggests law, but relies on both the upper and lower house to make law reality. So lets see for the record if Obama will get behind “Strict regulation of the financial system”, because now he has the opportunity to do so. I definitely don’t see printing more cash as a viable solution and so far to my best recollection this is what we have seen from Obama.
September 23rd, 2009 at 9:57 am
Give it time. The world financial system was literally on the brink of collapse only a year ago. That is a fact, it’s not something I’m making up or even exaggerating. We were very, very close to a run on the banking system unlike anything seen since the Great Depression. And this time it could have been much worse. Money markets were collapsing like fish on hot rocks. Were the actions taken perfect in their timing or measure? Certainly not. No human endeavor is ever perfect. But here we sit, one year from the near total collapse, and most people think the financial system has stabilized to the point where fears of outright collapse are firmly in the rear view mirror. There are excesses yet to wring out, primarily in the commercial real estate arena, but that deleveraging has begun. Obama has said he will make reducing the deficit over the long haul a top priority of his administration. We will see if he can make that happen. In the meantime, let’s not forget his administration inherited an annual deficit of over $1-trillion for the previous fiscal year. This will be a long-term issue, and no one should expect miracles.
September 24th, 2009 at 9:33 am
2010 Tax brackets are now out and it was interesting to see what a turn around one year makes – thanks to 0 inflation. hardly any changes to the tax brackets, which means higher taxes in relative terms for everyone next year.
October 1st, 2009 at 3:42 pm
If I hear one more person try to tell me that the country will implode if the taxes of the wealthiest people in the country raise, I will throwup….the highest tax rate used to be around 60% or more that was used to penalize those people who took advantage of the system to gouge and horde large sums of money…the wealthiest state that people have no entitlements…but, state that they are entitled to all the money they can horde and should not be taxed…because for some reason they create jobs…well, let me make this clear, corporate executives do not use their personal incomes, bonuses, and perks to pay for employee salaries…and you should also know that with the cuts in employees, they do increase their salaries…the idea that the cuts are to make the corporate more profitable is BS….just look at the investment bankers….
October 8th, 2009 at 3:03 pm
I have had the opportunity to live in England until a few years ago where our VAT ( value added tax ) was 17.5% on everything we bought on the sticker , not once we got to the cashier. The health care was free but you did have to wait to be seen unless it was an emergency. Business owners / self employed were the ONLY people who had to file taxes annually. Savings on paper, etc HUGE – your employer had your taxes removed at EACH paycheck automatically. I understand that by overpaying each week / month allows the government here to use your money ( interest free ) until you fill in the proper paperwork on your annual tax returns to ask for it back…. BUT beware; fill in the wrong one, forget to check the right box…… HUGE fines etc etc will follow….
Now to my question; I was until recently a single parent working a full time job and then a couple of other jobs to make sure I met my financial commitments – I have NEVER received any child support so REALLY had a lot to make up. I am constantly hearing how companies who mismanaged their businesses have received millions in “bail-out” including banks. I also have heard that several homebuyers who bought mortgages beyond their financial ability to pay long term when the ’starter’ repayments wore off are being helped out. First time home buyers are being offered monies to buy homes – to encourage once again those who probably shouldn’t be otherwise buying one….? I simply don’t get it? Shouldn’t those who CAN be helped too? Did I take those additional jobs because I wanted to work until I dropped or to meet MY obligations, to MY children and to pay MY country taxes?
Looking back if I had only sat back and run into thousands of dollars of debt I could be receiving money for nothing too…… It really upsets me when I see those TV ads saying ” Do you owe the IRS thousands of dollars?” This is then followed by people claiming they owed $200,000 but only had to pay $ X.. how is THAT fair ? I owe whatever I have to pay that amount – no discount , not breaks…..
Is America really out to reward the bad business owners and people who cannot manage their money? In a normal world they would be fired, made bankrupt etc please help me explain this upside-down system to my children who are constantly telling me to give up teaching elementary school to run a McDonalds where I would make so much more money without the stress teaching today has.
Thank you in advance for any help / clarification.
Carol
October 8th, 2009 at 4:43 pm
If you are making $372,950 a year you are not struggling. End of story.
October 11th, 2009 at 4:01 am
Ah, but what if you’re making $372,949 a year? Don’t us poor slobs deserve a bailout?
I kid, of course.
I get a little annoyed at those people who go on about how they don’t care who’s in office, so long as they can keep their “hard-earned money”, then proceed to whine about “bail out” this and “deficit” that. If you don’t pay attention to who’s in office, if you don’t take the time to inform yourself about the facts–FACTS, not some politician’s opinions stated AS facts, mind–if you don’t do your job as an American citizen and participate in this government as an informed citizen and voter; then you have no right to complain when things don’t go your way.
That lack of basic citizenship skills, so prevalent in the Baby Boomers and their Age of Me First, is the root cause of our troubles today.
-It’s why we dismantled, law by law, the network of regulations which kept banks in check.
- It’s why we’ve lowered taxes over the last thirty years so far that we can’t even keep up interest payments on the loans, much less pay down our debt like honest people, and have to lie on our government’s balance sheet like a corporation circling the drain.
- It’s why we’ve closed our eyes to the fact that we have the worst health care this side of a third-world country, and console ourselves by saying that, at least if we pay through the nose, we can at least still find a few doctors who will work in this country, so long as each doctor has two lawyers to defend him from lawsuits and four secretaries to help him wade through the labyrinth of our “insurance provider network”.
- It’s why our nation’s children were raised on television and “participation awards” rather than achievement, and why so many of us are becoming disillusioned because we have grown up into a world where we will be forced, for the rest of our lives, to spend our hard-earned money paying down our parents’ excesses.
But that’s all behind us now. The Boomers are retiring, and though they’ll no doubt still be watching Fox News, and blithely voting their children into debt slavery in order to lower their taxes and keep up their Medicare benefits (you kids can pay for your OWN healthcare, though!), hopefully they’ll soon be too senile to make it to the real voting booth, and will instead content themselves by agreeing loudly with Rush Limbaugh that government should stay our of everyone’s lives, except to ensure that nobody ever aborts a child, or burns a flag, or utters a swear word on TV, ’cause that’s just un-American.
Those who read this far probably think I’m a Democrat. Well, I’m not. I’m not a Republican either, nor a Libertarian, nor Socialist/Communist, nor any of those other parties on the ballot (though I gotta admit the Pirate Party’s got a great name). I’m an American. I believe in the power of the individual to shape his fate, through hard work and perseverance. I believe that government is nothing more or less than every individual in this country investing what they choose toward the good of the community, and because of this everyone who talks about how government is ruining this country really has noone but themselves to blame for not putting in the work to change it.
If you choose not to participate, then you have no right to complain when someone else makes your choice for you. Get out there and participate in the national debate! Vote! Convince your friends to vote! Find representatives who will work to get things done, like Barak Obama and Olympia Snowe, rather than mindless drones who say “No” to everything just to score political points while the house burns down on their heads!
And then, if you’ve done everything you can and we fail anyways? Yeah, then you can complain.
October 11th, 2009 at 4:47 pm
Eyeless1, hear hear!
And I AM a boomer myself.
October 14th, 2009 at 10:36 am
I’ve lived and worked in three western democracies, I and most people in the other two western democracies had no problem paying our fair share of taxes for the services that the state provided. The other two had universal healthcare so people didn’t have to pay taxes in the form of insurance premiums, deductibles, copays and were never denied coverage. But that’s another story.
Most people in America, although a smaller percentage than elsewhere, expect to pay for their services and the privilege of living in a western democracy too, What’s different here is that there is a very noisy and well-funded continuous campaign that aims to further enrich the already wealthy at the expense of the vast majority of working Americans. The Bush administration put this program on steroids and we all know what that led to. Economic meltdown for the many, vast wealth increases for the few.
October 20th, 2009 at 12:13 pm
It is obvious that President Obama lacks the practical life experiences that fuel common sense decisions. If you go in dept. you go backwards, If you invest in non product producing entities they return nothing. How about investing in Doctors, Scientists and Engineers for the future. How about Tort reform, the lawyers produce nothing except grief. Why aren’t the same laws applicable to Government employees and Politicians that we are expected to abide by. Our elders are turning in their graves. Support the people who produce like the rest of the industrialize countries, Help those who need help not those who want help
October 23rd, 2009 at 1:35 am
There are alot of people who are using the system out there to make their income tax smaller. I had an employee tell me once that she was going to “divorce” her husband to try to collect on food stamps/Medicaid for her 4 children etc. She was still going to live with him but not be married. He was an illegal so he was off the grid anyway working construction jobs. This is what the American taxpayer is working for….people who decide to take advantage of the system here for their benefit. They have children they can’t afford to have someone else pay for them (health benefits, food stamps, HeadStart etc). I told my employee that I would fire her if I knew she did this. Needless to say, she quit a month later. I know this is what she is doing.
The problem with this country is that we feel bad for everyone…the compassion is endless. Persons from other countries have children born here in order to receive benefits that they can’t get in their own countries. Do you blame them? Why would you become a citizen of this country and pay income taxes (or not)? You can still get healthcare via our emergency rooms, you can still send your kids to American schools and you don’t have to pay the IRS. NO AUDITS FOR YOU. ONLY FOLKS WITH SOCIAL SECURITY NUMBERS GET AUDITED.
October 28th, 2009 at 2:51 pm
I am enjoying the debate going on here. Far better than most drivel I read on blog posts and there seems to be a minimum of silly “haters” spouting nonsense. However, talking about federal income tax rates exclusively is a bit short-sited. I live in Ohio, I pay 25% to the feds, 5.75% to the state, 1% to my municipality, and .75% to my school district. Combined, that is a 32.50% tax rate on my income. However, this is deceiving too. Of course, I am leaving out social security and medicare. Once these two are added, nearly 50% of my income is taken by the government before I ever see a dime. Like most of society, I see the need for taxes. We live in a civilization that requires upkeep and that costs $$$$. But I am bit tired of our comparisons to third world countries (I have spent much time in 15 of these countries including Vietnam, Cambodia and Peru over the past 20 years) and how much better we have it here. The comparison is erronious–apples and oranges folks. We should be compared to other countries SIMILAR to ourselves, e.g., Germany, Japan, Canada, etc. What you find (excepting Japan) in these cases are similar rates of taxation, with variances of the method of taxation of course, but with far better services and standards of living than we have here. When a country like Sweden, for example, pays 50% of their income, they get superb roads, stellar schools, great medical care, efficient public transit, and a social welfare system that takes care of its indigent, mentally ill, and homeless. We (the US) get ill-advised and poorly planned wars, pot-holed roads, embarrassing public schools, no public health care unless you’re on medicaid or medicare, almost non-existent public transit, and a inefficient and ineffective welfare system that largely ignores the groups listed above. The issue is not taxation per se. The real issue is that we pay too much for too little.
October 30th, 2009 at 11:32 pm
Rich people pay more taxes cuz they beifit more from the exsistance of society. Also is your tax bracket 35%, yes, but do you really pay that? no, the rich have the means to hire professionals to give them all the tricks of the trade to pay less and hide some more… If the govenment lowerd the highest tax bracket from 35% to 20% would everyone all in a sudden say “wow thats so much more far, I will stop hiding money in my off shore tax haven”… no they wouldnt. They would do the same thing thier doing now and keep the difference. The whole write off, loopholes, exemptions need to be overhauled. Then you can start talking about a more fair bracket system.
October 31st, 2009 at 8:49 pm
Listen up… This country is headed for socialism. All the crybabies asking for handouts should get a life. This country is a capitalist country. Go out and better yourself and make plenty of money so you can pay high tax rates. Don’t expect my tax dollars to fund your life style because you are lazy and want to use foodstamps and sit on the bed watching oprah. Go betetr yourself, use opportinities and hard work to get ahead. Don’t blame the “rich” for your problems. Do you think all the rich became rich because of a silver spoon in their mouth? Go work 15 hour days, grind it out and make something of yourself
November 2nd, 2009 at 10:44 pm
Ok. So this is just based on my experience. I started my career making $300 a week, which today would be considered poverty level. This was not that long ago. I worked hard, put myself through school, spent 12-15 hrs 6 days a week getting better at what I do and I have been blessed with promotions that now allow me to make a substantial amount of money. Please don’t state that it is “fair” to keep raising the tax on rich people. I will NEVER be against paying taxes to help those who literally cannot work, however, it makes me irate to drive by and see the ‘porch sitters’ sitting around waiting for their government check to come in the mail so they can continue to sit. I came from nothing and made something. Someone’s background is not an excuse in my book. Also, I am not mad at the “sitters” themselves, however I am angry that our government has ALLOWED them to do this!! I LOVE AMERICA! Let me say that again, I LOVE AMERICA, however, our system is severely broken. I don’t care if the country is democratic or republican run, it needs to be fixed. And to all those sitters who could work if they chose, shame on you.
November 4th, 2009 at 2:08 am
NOBODY SEEMS TO UNDERSTAND TAX BRACKETS!!! YOU DO NOT PAY THE “MARGINAL” TAX RATE ON YOUR “LAST DOLLAR”!!! I WILL PLOT A SIMPLE % TAX VERSUS INCOME SO YOU CAN UNDERSTAND IF YOU REALLY WANT TO KNOW!!!!
November 4th, 2009 at 8:05 am
Phil,
You are sadly mistaken. You in fact DO pay your highest marginal tax rate on your last dollar earned. The graph you propose would indeed show a lower rate because you are talking about the average tax rate on total income, not on marginal income. If you’ve ever taken math before…there would be an asymptote at the highest marginal tax rate as your income goes to infinity.
November 5th, 2009 at 2:54 am
KEVIN —THE “LAST DOLLAR PARADOX” CAN BE EXPLAINED BY LOOKING AT THE IRS TAX TABLES. FOR EXAMPLE, WITH A TAXABLE INCOME OF $78,850,THE MAXIMUM INCOME IN THE SO~CALLED “25% BRACKET”, A SINGLE PAYER’S TAX IS $16,063/ 20.37%!!! YOUR “LAST DOLLAR” IS ONLY 20+% AT THIS INCOME LEVEL!!! MANY “EXPERTS” MAKE INCORRECT EXPLANATIONS OF THE “LAST DOLLAR” TAX DUE TO THE ODD METHOD USED TO DEFINE THE PROGRESSIVE TAXATION RATE/ A SIMPLE STEPPED,STRAIGHT~LINE GRAPH WOULD BE EASIER FOR MOST TAXPAYERS ( AND EXPERTS ) TO UNDERSTAND!!!
November 5th, 2009 at 9:21 am
Phil,
While I think we understand each other, let me carry your argument to an extreme to illustrate its failure and that there is no paradox. Lets say, you have a graduated tax system similar to the IRS, but tax rates of 15% on first 25k of income, 50% on next 25k, and 100% on any remainder of income. So, with your line of thinking, the person that earns exactly 50k in taxable income has a 16.25k tax liability for only a 32.5% average tax rate. Now, lets say an ingnorant person with no knowledge of the tax code, earns 60k in taxable income, his tax liability is now 42.5k for an average tax rate of 70.8%. Now, was this person’s last dollar taxed at 70.8% or 100%? This person has no incentive to earn any income beyond 50k because of the punitive marginal rate. THIS MUST BE UNDERSTOOD BY EVERYONE. EVENTUALLY GOVERNMENTS WILL TAX THE INCENTIVES OF PRIVATE SECTOR PRODUCTION OUT OF THE SYSTEM. A GOVERNMENT’S VERY LIFEBLOOD IS PRIVATE PRODUCTION. SIMILAR TO A CANCER THAT EVENTUALLY KILLS ITS HOST, TAXATION IS THE CANCER THAT KILLS THE HOST OF PRIVATE ENTERPRISE.(sorry about the CAPS) Those people clammoring for tax the rich at punitive rates don’t understand economics and what drives investment and job creation. I had to laugh at the reaction to the elections the other day as I heard over and over on the media that government “must do something about the jobs situation”. That people have connected governement policy to job creation truly shows how poor our education system is and how far we need to go as a country.
November 5th, 2009 at 10:43 am
What a great thread this has evolved into. Seriously!
Phil, there is no “paradox.” You are confusing the effects of a stepped bracket distributed across the total taxable income amount with a “sliding scale” system, basically. Every dollar beyond the set maximum bracket limits IS most assuredly being taxed directly at the next higher bracket rate. You are doing nothing more than averaging the final total tax bill across the entire total of taxable income. I could argue that every additional dollar taxed at the highest marginal tax rate applicable also increases the tax rate for the first dollar taxed. Because it does!
Semantics.
November 5th, 2009 at 3:20 pm
So Kevin, let me make sure I understand your last post.
On the one hand, you say punitive taxation by the government will stifle job creation. On the other hand, you ridicule those who say government policy can have any effect on job creation.
So….which is it?
November 5th, 2009 at 3:56 pm
Steve,
Good question, its both! I don’t belive they are mutually exclusive. I understand where I might have confused you and not been so clear, however, I believe they are congruent thoughts. Let me try to explain. Government policy most assuredly does have an effect on willingness/ability for the private sector to create jobs, but ask yourself, does it maximize job creation? And in that vein, punitive taxation only serves to further minimize job creation from an already non-maximum starting point. I argue that government policy only affects job creation to the extent that the private sector can overcome the hurdles placed in front of it by government. And actual government jobs are paid through taxation, and by definition, are sub-maximum to a free-market solution.
November 6th, 2009 at 12:44 am
KEVIN, YOU ARE INDEED CORRECT; EVERY TAXABLE DOLLAR IN A PARTICULAR “TAX BRACKET” IS TAXED AT THE BRACKET’S “MARGINAL RATE”!!! THE POINT I WAS TRYING TO MAKE IS THAT MOST TAXPAYERS BELIEVE THAT THEIR MARGINAL TAX RATE IS THEIR ACTUAL RATE OF TAXATION. IN REALITY,THEIR ACTUAL EFFECTIVE TAX RATE VARIES FROM A MINIMUM OF ABOUT 14% AT THE LOWER END OF THE “25% BRACKET” TO A LITTLE OVER 20% AT THE HIGH END FOR A SINGLE 2008 TAXPAYER. WIKIPEDIA’S “INCOME TAX IN THE U.S.” WEB SITE HAS A FAIRLY NICE GRAPH THAT SHOWS ACTUAL (EFFECTIVE) TAX RATES… (IT SHOULD BE NOTED THAT THE ACTUAL TAX RATES ARE VARIABLE & ARE ALWAYS LESS THAN THE “MARGINAL TAX RATES” !!!
November 6th, 2009 at 11:09 am
OK, Kevin. Here’s the deal. Your post in reply clears some things up, but in your original post you definitively stated “That people have connected government policy to job creation truly shows how poor our education system is and how far we need to go as a country.” You changed the argument in your reply when you said “Ask yourself, does it maximize job creation?”
Additionally, you railed on “punitive tax rates” killing private sector job creation. Obviously, tax rates are a direct function of government policy/law.
I perceive a few issues in both assertions.
I can easily connect government policy to job creation, in many, many ways, both positively and negatively (obviously, a negative influence on job creation implies stifling or even destruction of jobs). In fact, you yourself tried to do the latter with your statements about “punitive” tax rates.
First, please define what constitutes “punitive tax rates.” Is this a little bit like defining what is “obscene,” i.e., you may not be able to define it, but you know it when you see it? It’s easy to throw pejorative words around in the context of espousing your views, but it’s a little more difficult to be specific, no?
Second, as far as the influences of government policy on creation of jobs, how many examples do you want to see? Macro governmental policy has historically had HUGE impacts on job creation (or destruction). I won’t even address the New Deal…too obvious. But what about America’s decisions to enter (or start) any armed conflict, rightly or wrongly? Look at WWII, or Viet Nam, or Iraq for examples of the impacts on the GDP and hence the underlying industries that support the war efforts.
Government spending on infrastructure, from the local all the way up to the federal levels, has tremendous impacts on employment levels in associated industries. I know this to be fact, as I am an engineer engaged in the design of public infrastructure elements at virtually all levels. It may take awhile on the national level, but I can tell you without a doubt that aggressive local infrastructure investment by our local government and a major local state University have kept my company in business over the last couple of years, and has provided work for contractors throughout our area, while addressing significant public needs in the process.
Government can impact trends in employment through legislation addressing energy policy. If you have not seen what’s happening in the panhandle of Texas, down through the Sweetwater area into the northwestern fringes of the Hill Country, then you have not seen a very clear marker.
There are so many examples, it boggles the mind that anyone would not be able to connect government policy to potential job creation (and yes, even job destruction).
But to say the government has no effect is simply not factual in any sense.
November 6th, 2009 at 9:58 pm
Steve,
Obviously, a very complex issue and I accept your points and beg your pardon for not being more specific and careful about my statements. I am thinking of the question in terms of government policy relative to a free market policy. I want someone to prove to me that government investment is equal to or better than what a free market delivers.
Lets say a government opens a new park. Everybody says what a great thing to do! Now, the park has been open 5 years and been lightly attended and has been running at an operating loss every year. A politician will come to his/her constituency and say what a great thing we have here, we need to raise taxes to cover this loss i.e. government is largely, not totally, impervious to market signals. Now, contrast that with a free-marketeer who opens a shop and is suffering losses. The market is sending a message to that owner that his wares are undesirable. He cannot go and raise taxes, instead he must make changes or be out of business which would free up the space for a more productive venture. I believe truly free markets, not the quasi-free markets we have today, will maximize employment and income relative to a government deciding where to invest capital.
Please think of taxation as a redistribution of wealth, because that is exactly what it is. So, in a sense, any tax is a “punitive” tax that forces private investors to seek a higher rate of return than they otherwise would. Since governments don’t earn their revenue, they cannot possibly “invest” this money better than the private sector (I already know you will try to debunk that statement). Governments can and will distort markets beyond any semblance of a free market, just look at our most recent sub prime debacle and the tax-advantaged status real estate has held for many decades. Just a warning to beware of politicians saying “look what the free market has done”, when in fact the government policies of Fannie Mae and Freddie Mac are largely to blame for the distortions in that market. Lots of other blame to go around there too as I’m sure you are aware.
I ask you to relate the AIG bonus /Exxon windfall profits situations to your company, where the government wanted to confiscate bonuses/earnings because they deemed them too high. What’s to keep the government from saying to you “hey, I’ve helped you stay in business and I think your profits are too high given you are doing a public service”. Sounds far fetched, but it is a thin line from AIG/Exxon to the small businessman. Governments do crazy things in a crisis, all in the name of the “public good” of course.