I am the last person you should come to for tax counseling. It’s Sandra who takes our receipts and other stuff to have a professional figure out what we have to pay. I cringe in fear at the very mention of income taxes, and I sit in a corner biting my nails until she returns with the dreaded news.
But even I can tell we’re being misled by the media in the debate about ending those Bush tax cuts for the rich. (Yes, as far as I’m concerned if your family makes more than $250,000 a year, you’re rich.)
Income tax is so complicated in America that I can’t begin to explain it, but it’s just not true that families making more than $250,000 a year would have to pay income taxes equal to 39 percent of their income if Congress lets the Bush tax cuts sunset as scheduled at the end of the year.
That would be $97,500 – if my calculator is right.
And it would be enough to make you sorry for those hard working folks who are being robbed of the sweat of their brow to pay for a bloated government, etc. etc.
But that’s not how it works.
If you pay income taxes (and you’d better!), you know it’s based on a graduated scale. And you know you get a bunch of deductions.
For example, a single taxpayer who earned $10,000 in 2009 paid 10 percent on the first $8,350 ($835), and 15 percent on the rest ($247.50), for a total of $1,082.50. The 15 percent rate applies to income up to $68,000, then rises to 25 percent – and so on.
The top rate (currently 35 percent) applies only to the part of your income above $373,650. Below that you pay 33 percent on the amount you make in excess of $209,250. (At least, that’s the way it was in 2009.)
I found these figures on the web and they could very well be out of date (or I could have copied them down wrong). But you get the idea: the tax is “graduated,” so nobody would pay 39 percent of their entire income if the tax cuts expire Dec. 31.
And don’t forget, the rate applies only to “taxable” income. In 2009, single taxpayers (and married taxpayers filing separately) were allowed a standard deduction of $5,700. Married couples filing jointly, and surviving widows or widowers, were allowed $11,340. And “heads of household” were allowed $8,350. Taxpayers over 65 got to take off an additional $1,100 (yeah!).
Of course, if you make more than $250,000 a year, you probably have an accountant fiddling with your tax return. And they don’t settle for standard deductions. They know how to “itemize.”
Browsing the web, I found out that you can claim all sorts of things – medical expenses, other taxes, mortgage interest, points paid on your mortgage, charitable gifts, even losses from accidents and theft.
If you happen to be self-employed, there are such additional deductions as contributions to a self-employed pension fund, health insurance premiums, and “one-half of your self-employment tax” (whatever that is).
Are you paying for a “dependent child” to attend college? Deduction.
Did you have to move this year, in order to keep your job? Deduction.
Did you take a new job that required you to move? Deduction.
And if you still figure your taxes are too high after all your deductions, you can buy tax-free bonds and debentures – or invest in a tax shelter.
So we need not weep for the rich. They can look after themselves. And with the kind of deficit this nation is running, somebody has to pay more taxes.
As long as it’s not me!
Now that I’ve piqued your interest, you can find out about the president’s proposal here: