October 27, 2008
How Much is Enough?
I have a simple question for Obama and his liberal supporters: How much is enough? Liberals constantly say the wealthy in this country are not paying their “fair share.” I’d like to know what they consider fair. Given that the top 5% of earners in this country pay 60% of the total tax bill, while the bottom 50% of earners pay less than 3%, I’d like to know what the liberals in this country consider fair. 30%, 40%, 50%, more? Give me a number.
I sat down this evening and tried to calculate what % of my income is confiscated by the government and redistributed to others. It is incredibly difficult to calculate, due to the vast array of hidden taxes, regulations and fees. I modeled my actual income, deductions, tax deferred contributions, property values, spending, etc. All rates are the actual percentage of my gross income before deductions (not AGI). FICA and Medicare rates include the employer contribution which reduces the total compensation my employer is willing to pay me.
- 19% – Federal Income Tax
- 6% – State Income Tax
- 3% – Medicare Tax
- 6% – FICA (social security) Tax
- 2% – Federal Capital Gains Tax
- 1% – State Capital Gains Tax
- 4% – State Property Tax
- 2% – Sales Tax
- 1% – Gas Tax, Car Registrations, Other Fees
- 3% – Increased Price of Goods and Services
- 3% – Corporate Taxes
——————————-
- 50% – Total Annual Tax Bill
That’s right, half! 50% of my income goes to others. That is after I maximize every deduction. To me, that is a staggering amount. But Obama says I’m not paying my fair share. So if half isn’t enough, how much is?
Some of these numbers need to be put into context. My federal marginal rate is offset by a reasonable number of deductions, bringing my blended rate down to 19%. This is slightly higher than the average for the top 2%-5% of tax payers which is 17.48%, but less than the average for the top 1% which is 22.79%.
I live in California so my marginal state income tax is 9.3% and blended rate after deductions in 6%. For capital gains, I calculated what I expected to earn this year, based on the last five years. The recent market blow-up makes these rates somewhat less likely, although I expect much larger capital gains in future years when the market rebounds. My property tax rates are based on my property value 5 years ago (thanks Prop 13!). If I bought new today, my rates would be higher. Sales tax is based on my actual consumption levels.
The two hardest taxes to calculate are the effects of corporate taxes on my earnings and consumption. Corporate taxes directly impact me by reducing my capital gains and dividends of the corporations I’ve invested in. These taxes reduce the value of both my taxable holdings and my IRA and 401K accounts. They are hard to calculate, but I used average PE ratios and corporate taxes paid as a % of net margin before tax on the companies I own.
Also difficult to calculate is impact of taxes on the prices paid for goods and services. As I’ve stated in previous articles, companies don’t pay taxes, they collect them. Taxes are paid by shareholders, employees and consumers. I have seen studies suggesting the impact of taxes, fees and regulations can be as high as 30% on the price of goods. I used a conservative 10% on my actual consumption to determine my personal impact.
For all these calculations, I used the 2008 rates, not the higher 2010 rates that will result when Bush’s tax cuts expire. I also have not calculated the future impact of death taxes on my lifetime income or net worth. The bottom line is roughly half my income goes to others. I am squarely in the middle class that Obama says he wants to protect, but his tax plans will raise my taxes. One problem with class warfare is it is hard to determine who is rich. My income is very middle class in California, but might be considered wealthy in Mississippi. My cost of living is much higher in California, but federal marginal tax rates are not adjusted for cost of living.
So I ask all liberals, how much is enough? How much of my own money do you think I deserve to keep? How do you derive at your answer? What justification do you use to confiscate my hard earned wages to “spread the wealth around?” When is it no longer selfish of me to say enough is enough?
drinky crow said,
October 27, 2008 @ 11:24 pm
boohoo hoo
scarabic said,
October 27, 2008 @ 11:29 pm
As someone who recently broke into the top 10% of earners, I feel your pain personally. It also amazes me how much of my pay goes to taxes. This effect is more dramatic from my point of view because it has been going up my entire life. When I worked for minimum wage I paid less in federal tax and actually got a refund on top of that. Soon I was paying about a quarter of my check. Now I’m almost giving up 40%. It feels like it’s getting worse and worse.
However, I don’t assign the same conclusions that you do. I think you have one major flaw in your reasoning:
“That’s right, half! 50% of my income goes to others.”
Taxes are not “money that goes to others.” Taxes go to the state or country of which you are a part. I get really tired of wealthy people pretending that they are some kind of money-printing island being raided by filthy savages. As if money simply issues from their loins spontaneously, as if they are some kind of wellspring of cash.
The fact is that we are all part of a larger economic and societal fabric. Why should I pay taxes for better public transportation when I drive my Mercedes to the company I own each day? Well, maybe so that my employees can afford to get to work. Why should I pay federal income tax? Well, maybe to ensure that there will be an educated workforce in this country to work for my company in ten years’ time. Do I personally walk into my company and make all the money magically appear each day? No. I am the product of my family, the school I went to, my own hard work, and the help of many others. Do opportunities simply fall from my pant legs? No, they come about because of the larger economy operating around me.
Do I owe some of my success to “others?” Yes. Either because they helped me, or because my personal genius could not create wealth on its own without their participation.
Do I have a staked in investing in this country? Yes. Unless I am effing Stephen King and brilliance simply falls off my lips. I guess even he needs a literate population who can afford to buy his books. Better pay those taxes that fund education…
miguel de sousa said,
October 27, 2008 @ 11:37 pm
You moron!! You’re money has been “redirected” to your favourite parties Cronies for 8 years now — aw the other cronies gonna start getting some of that now? poor you, dear Idiotic, deadbrain, republican.
Now for the bit your really going to HATE — from your link above
“he top 1 percent of tax returns paid 39.9 percent of all federal individual income taxes and earned 22.1 percent of adjusted gross income, both of which are significantly higher than 2004 when the top 1 percent earned 19 percent of adjusted gross income (AGI) and paid 36.9 percent of federal individual income taxes”
THATS 22% of ALL MONEY EARNED in the US, gee I wonder why they pay tax — maybe cause the are rapping the economy.
But it gets better — “the AGI of the top 1 percent of tax returns fell by over 26 percent. In that same period, the AGI of the bottom 50 percent of tax returns actually increased by 4.3 percent.” — WOW! Your 1% seems to be getting along nicely while the 50% are getting rapped!
So I ask, idiot american, How Much BULLSHIT is Enough?
bill said,
October 27, 2008 @ 11:40 pm
Scarabic,
Thanks for reading and commenting. Note I never said that there should be no taxes. I understand that government services require revenues. I fully support a very limited government, and a consumption tax to fund it. My question remains how much is enough? I use the same roads you do, but I pay more. And for the record, I drive a 5-year old beat-up Ford pickup, not a Mercedes.
Drinky Cow,
That is exactly the type of intelligent response I expect from an Obama supporter. Put down the pipe and get a job!
bill said,
October 27, 2008 @ 11:44 pm
Miguel,
Thanks for not answering the simple question, thereby making my point. So nice of you to check in from Australia to comment on US tax policy.
FFFish said,
October 27, 2008 @ 11:44 pm
The top 1% of the popullation has 90% of the wealth. It might be fair, then, for them to be contributing the most in taxes, having benefited so extremely by the infrastructure of the nation.
bill said,
October 27, 2008 @ 11:49 pm
FFFish,
1) I am not in the top 1%
2) Wealth and Income are not the same thing
3) You didn’t answer the question.
How much is enough???
Thanks for reading and commenting!
John said,
August 6, 2009 @ 3:41 pm
I’ll never understand the idiotic notion, by these liberals, that the “big bad rich are raping & pillaging the economy” at the expense of all those pitiful unfortunate poor people! Those of us who pay the lions share of the taxes are the ones creating, driving, & sustaining the economy. See the one about the top 1% benefitting from all our highways & such! They are the ones paying for it while the other 99% benefit. Hello!!!!
A “real liberal” is someone who chooses to do good things for other with their money. These guys want to tell me what I have to do for others with MY money!
Those of us in the top 10% pay about 85% of the bill FOR EVERYTHING & guess what, the other 90%, who only pay 15% BENEFIT!. By the way, since they out number us 9 to 1, they use at least 90% more than us. Not counting welfare & all the gov’t handouts that we pay for but do not qualify for because we are “rich.” I drive a 10 year old F-150.
You would think they would at least have the decency to say “Thank you!”
John said,
August 6, 2009 @ 3:43 pm
Oh, and the answer to the question on how much is enough? For starters, it’s less than I’m paying now!