[quote lifeizfunhuh]The thing that (rightfully) pisses people off is that the brunt of our nation’s tax revenue is generated by the bottom 80% of citizens who take home about 40% of income (and control a far lesser portion of wealth).[/quote] This is a falsehood. Take a look at your tax payments (total) from your 1040/540s. Now for comparison:
Regan during his governor days was paying more than $240,000/year in federal taxes. How many times your tax payment is that?(don’t have to tell me.. just calculate it).
The U.S. has a progressive tax schedule. Each additional dollar gets taxed at a higher percentage. If you have the 1040 instructional booklet, go to the back of the booklet… or try this link for the 2010 tables: http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
Go to the last page. Lets take ‘single’ for example.
If you make up to $8,375/yr – you pay 10% federal taxes.
If you make between $8,375 and $34,000 – you pay between 10% and 13.8% in taxes (the first $8375 slid under the tax bar because the 15% applies to the amount over $8375) Plugging the brackets into handy-dandy Excel, gives:
Income, Tax, Total Percent
$5,000.00 $500.00 10.00%
$10,000.00 $1,081.25 10.81%
$15,000.00 $1,831.25 12.21%
$20,000.00 $2,581.25 12.91%
$25,000.00 $3,331.25 13.33%
$30,000.00 $4,081.25 13.60%
$35,000.00 $4,931.25 14.09%
$40,000.00 $6,181.25 15.45%
$50,000.00 $8,681.25 17.36%
$60,000.00 $11,181.25 18.64%
$70,000.00 $13,681.25 19.54%
$80,000.00 $16,181.25 20.23%
$90,000.00 $18,909.25 21.01%
$100,000.00 $21,709.25 21.71%
$110,000.00 $24,509.25 22.28%
$130,000.00 $30,109.25 23.16%
$150,000.00 $35,709.25 23.81%
$170,000.00 $41,309.25 24.30%
$190,000.00 $47,816.75 25.17%
$210,000.00 $54,416.75 25.91%
$230,000.00 $61,016.75 26.53%
$250,000.00 $67,616.75 27.05%
$300,000.00 $84,116.75 28.04%
$350,000.00 $100,616.75 28.75%
$400,000.00 $117,643.75 29.41%
$450,000.00 $135,143.75 30.03%
$500,000.00 $152,643.75 30.53%
$550,000.00 $170,143.75 30.94%
$600,000.00 $187,643.75 31.27%
There are also income based limits to deductions as well.
The truth is that about 20% or less of the population pays 80% or more of the taxes. This above table does not include SS tax or state taxes. Keep in mind that if you are earning more than $35k/yr after retirement – you actually lose a bit on Social Security.
While qualified dividends (US based companies) are not taxed – the company is generally taxed at 35% federal(statutory rate). As a common stockholder, you own the business – much like a partnership but with different liabilities (this means that the income sourced from dividends has already been taxed – at 35%). A partnership/LLCs income is generally ‘pass through’, taxed at the individual rate, which is often lower than the 35%. Dividends are not tax deductible from the aspect of the company.
Capital gains brackets for Long Term are 5%,10%,15%,20% depending upon income. (note: California treats long term and short term capital gains as standard income).
The only exception here is collectables(28%) and Real Estate(first $250k exempt on principle property (500k for married)). Personally, I don’t like the R.E. exemption because I feel it sponsors RE speculation – but also keep in mind that the U.S. government create inflation, which is part of the factor that drives up R.E. prices – and creates the R.E. capital gain.
Stock options are treated as income for tax purposes, unless held for 1 year after exercising the option. In that case the gain is split between income and capital gains. If restricted stock is granted – the difference between the strike price of the granted restricted stock and current market price is considered income (in money) and gain during holding period is considered capital gains. Above tables and rates apply.
