The Truth About Taxes

The Truth About Taxes

USA Today did a wonderful job of "not telling the whole truth" about income taxes in an article designed specifically for one purpose. The purpose was to make the American people believe that Mitt Romney pays less taxes than the average American. I beg to differ on several points.

But first, I must tell you that I have personally prepared over 20,000 returns in my career. I have seen a pretty good cross section of American taxes. So, I did not gather my statistics from some company that I have paid to give me what I want to spin!

Secondly, at the end of the day, I could care less what other people pay.

Third, percentages can be misleading. The man still paid millions of dollars.

Now, did USA Today tell a lie? Well. They just didn't tell the whole truth. They made a nice table showing a family that makes $50,000 per year. They showed the average itemized deductions and taxable income. Then they showed the tax and the applicable tax rate. Of course, Romneys was lower.

However, they failed to point out that after you deduct itemized deductions, the average family has over $10,000 in exemptions, plus over $2,000 in tax CREDITS. All of which bring down their effective tax rate.

Notice I said "effective" tax rate. The article figured the rate of tax by dividing the tax by the taxable income. That is literally a joke. It has no meaning whatsoever. To get the effective rate, tha is what percentage of tax do I pay based on my income, you must divide the tax by the total income. This gives, for most people, a far lower tax rate.

In fact, nearly half of Americans pay NO federal tax. A great majority pay NO state tax, and to top it all off, a great numberof people actually get money BACK from the government in the form of the earned income credit. Which is the IRS's way of saying that you should be making more money than you do, so we will give you some of other people's money to balance the scales!

The director of the IRS was in the news last week and she pointed out that Pennsylvania residents received 1.8 BILLION ($1,800,000) dollars in earned income credits in 2010. Where did all this money come from?! It came from other people's taxes. Maybe some of it came from Mitt Romney's 6 million dollars he paid. When questioned on other deductions people could take, she discounted that and got right back on the free money wagon!

The truth is this. Not every American pays more than Mitt Romey. Not every American pays taxes. Every American should pay an amount that is fair. The problem is that Americans cannot come up with what fair means. It is a relative term. Fair when compared to what?

What I would encorage people to do is do what Mitt Romney has done. Look at the tax code. Educate yourself or find someone who is educated. Maximize it for you and your family. Look out for your own economy. I guarantee you that Obama, Romney, Newt or any other politician does not have your best interest at heart.

If you have an interest in lowering your taxes, just email me! It's your money!
Steve

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Comments 8 comments

secularist10 profile image

secularist10 4 years ago from New York City

The typical working person can only do so much to lower their taxes. The very rich can afford the best tax accountants and tax attorneys, and are in a position to store money offshore, as well as to buy federal subsidies, handouts and tax code loopholes from their buddies in Congress.

I work with small businesses and sole proprietors--you know, the "job creators" that all politicians say they love. Well, they actually have the toughest time come April, all while trying to run their business.

The simple fact is that Mitt Romney is the embodiment of everything that is wrong with this country's tax system. He may technically pay more than half the country if half the country pays zero--but that's only because half the country has no money to tax! He does, however, clearly pay less than the typical middle class or upper middle class worker.

The very rich have the ability to pay much less as a percentage of their income than the "merely" rich, the upper middle class, or middle class. That is the truth.

And regardless of your or my or anyone's definition, it's not fair.


createmyeconomy profile image

createmyeconomy 4 years ago from USA, Australia Author

I disagree. My 20,000 tax returns say different about that. When I can get people paying less than a 5% federal tax rate, that's pretty good. What kind of tax system do you propose?


secularist10 profile image

secularist10 4 years ago from New York City

You disagree that the very rich have the ability to pay much less? This is a well-documented fact. What is the typical income of your clients? Something tells me it's not that low. The tax system I propose would contain the entire tax code on a few pages, not a few libraries. It would also tax all income, whatever the source, at the same rate, as well as remove loopholes that only the wealthy are able to exploit. That would be a good start.


createmyeconomy profile image

createmyeconomy 4 years ago from USA, Australia Author

I do not disagree on ability. Ability is not relevant. I have clients that range from making $8,000 per year to over $1,000,000 per year. I agree with your tax system. The rate for all types should be the same and the same rate should be for everyone. A national sales tax in America that replaces all layers of government fat would be great!


secularist10 profile image

secularist10 4 years ago from New York City

Ability is most certainly relevant. Why should someone who makes $300,000 per year pay a higher tax rate than someone who makes $3 million, or $300 million?

A flat tax is not viable, either in terms of fairness or in terms of fiscal policy, but that is another whole discussion. I just say that all income should be taxed at the same rate, regardless of the source, but not regardless of the amount.


createmyeconomy profile image

createmyeconomy 4 years ago from USA, Australia Author

I used to think that way untill I had three great years of income and I thought why am I being penalized for doing better? The person who makes less than I do uses the same roads, has the same police protection, gets the same government services that I do, so we should pay the same rate. Now, a national sales tax would tax people who consume. If I make more money, I would naturally consume more and, therefore pay more in tax. The person who makes less would consume less and pay less in tax.


secularist10 profile image

secularist10 4 years ago from New York City

By the same logic, why should a person who spends more--i.e. contributes more to the system of economic exchange, and thus to general prosperity--be penalized more than the person who spends less? That might be an argument for a regressive sales tax.

BTW, statistics show that higher earners actually spend less as a proportion of their income than lower earners.

Again, I won't get into a big thing on progressive taxation here. I am actually in the process of writing a hub about it. Suffice it to say, the better you do, the more you have benefited from the overall socioeconomic environment. Each dollar earned is partly a measure of one's own effort, and partly a measure of one's utilization--either directly or indirectly--of the larger system. They have utilized the system more, and thus owe the system more.


createmyeconomy profile image

createmyeconomy 4 years ago from USA, Australia Author

Looking forward to your hub!

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