Comments on: U.S. Income Taxation Explained with Beer Analogy

By: SPBlythe

SPBlythe — Thu, 23 Jul 2009 00:17:08 +0000

So, to Steven (Nov 7) who thinks the MAX Tax is only 35% and the Rich pay way to little. My recommendation is to take a Math or a Tax course.

We Start with 35% Federal, Add 10% State CA, another 8-9% Sales tax, Try Gas Tax, Property tax, then there is Medicare & Social Security Tax – Yes its a Tax cause the “rich” will never see anything out of them. Then we can discuss the luxery taxes. Then there are all those non deductable expenses. Last year my take home was < 30% of my net income.

Frankly, I am tired of paying for your beer.

By: annonymous

annonymous — Fri, 26 Jun 2009 20:00:16 +0000

“First off, the examples listed infer that the rich are paying 60 percent of their “individual” income taxes. This is not true; they are paying 35%, which is the highest of all of the 6 tax brackets that currently exist.”
Obviously, the rich man is not supposed to represent a single person, but the top 10% of earners. And the entire top 10% of our country pays about 59% of the taxes, hence the analogy makes sense.

The point is not to say that the wealthy should not pay a larger portion of their income to taxes. The joke is analyzing people who criticize tax breaks, arguing that the rich get them too often. Well, the people that pay 60% of the taxes should get 60% of the break.

By: Steven

Steven — Fri, 07 Nov 2008 19:09:22 +0000

This is completely incorrect…and out of context.
First off, the examples listed infer that the rich are paying 60 percent of their “individual” income taxes. This is not true; they are paying 35%, which is the highest of all of the 6 tax brackets that currently exist. Now even that 35% is rarely paid by the wealthiest persons, the rich can take advantage of tax loopholes, including one that allows them to pay the capital gains tax rate of 15 percent instead of the ordinary top income tax rate of 35 percent.

Recently Warren Buffett (the third-richest person in the world) cited himself as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent. Buffett said that was despite the fact that he was not even trying to avoid paying higher taxes. “I don’t have a tax shelter,” he said.

Now lets talk about context, the 60 percent paid by the wealthiest man outlined in the horrific example, is to depict the total amount of income tax revenue received. Therefore, stating that the Top 5 percentile of wealthy Americans in this country make up 60 percent of the entire income tax revenue received. The top 5 percent own 60 percent of all wealth. So, now that you can see that the Top 5% owns 60 percent of our nation’s wealth, you should also understand why they also make up 60 percent of the yearly income tax revenue

Also, the top 20 percent owns over 80 percent of all wealth. In 1998, it owned 83 percent of all wealth.

Finally, if you tax someone making $40,000 a year 25% you take $10,000 dollars from them leaving them with a windfall of 30,000 dollars.

But if you tax Warren Buffet, making $46,000,000 a year, 35% you take $16,100,000 dollars, leaving him in poverty at 29,900,000 dollars. And as I said earlier, with the tax breaks and loopholes they see, they end up paying only 17% compared to the 25% the 40k a year is taxed. And good luck going to a non-third world country, offering a different system or at a lesser rate; England is taxing their rich higher at 40%, China at 45%, Canada is the lowest at 29%, but they don’t even tax those making less than $9,000 a year, period. Don’t accept these “jokes” at face value, do your research!

By: Scott Aikin

Scott Aikin — Mon, 20 Oct 2008 19:28:29 +0000

Interesting analogy. It kinda makes sense though because even though the richest person got the biggest discount he’s also paying substantially more than everybody else. But the final point about what happens if he leaves the country is very poignant. We’re incentivised to work outside the country by getting huge tax breaks for staying out for a year or more. With the ability to work online this might become very appealing to some individuals.