• Tax whiners

    Pardon my departure from health policy for a sojourn into Don Taylor’s home ground. These issues are related, since our public-sector health care obligations under either Democratic or Republican proposals will require greater revenue in the coming decades to achieve long-term fiscal balance.

    Yesterday’s New York Times included an entertaining but strange article by James Stewart titled “Think your tax rate is high? Try paying 102%?” The article follows Stewart’s earlier column lamenting the fact that his own tax rate greatly exceeds Mitt Romney’s.

    Neither column includes actual tax returns. So it is a little hard to pin down the particulars. Yet enough details are presented to suggest a different problem from the one Stewart emphasizes: the whining of affluent and upper middle-class people about tax burdens that are actually pretty reasonable.

    The article is subtitled: “Many complain of the I.R.S. Bite, but This One Stands Out.” If describes the “plight” of James Ross, age 58, who paid 102 percent of his taxable income in state, federal, and local taxes in 2010. It includes the comment:

    Mr. Ross’s plight illustrates something that comes through in nearly every response [to Stewart’s original column] and cuts across nearly all income levels: the disparities of the tax code don’t just pit rich against poor or middle class. It taxes people within the same income bracket at grossly unequal rates.

    To emphasize the point, a graphic box titled “How it’s possible to pay a 100% tax rate” describes the plight of a self-employed New Yorker earning $75,000 who ends up in the same position.

    Stewart is right about the apparent unfairness created by various loopholes. Yet there’s one basic problem here. Mr. Ross doesn’t have a plight. Stewart informs us—then promptly seems to forget—that Ross’s total taxes amount to only 20 percent of his adjusted gross income. Ross is a wealthy founder and managing member of a private investment firm. Because he has many itemized deductions and background wealth, his taxable income provides the wrong metric in examining his rather modest tax burden. He has no beef here.

    The graphic box is even stranger. New Yorkers pay genuinely high taxes. Yet this hypothetical person has $25,000 in itemized deductions for mortgage payments. To be persnickety, this mythical person also has $5,000 in charitable donations, which is statistically unrepresentative at this income level. This produces $12,473 in taxes, based on a presumed taxable income of $11,044. I just don’t know what this example is supposed to prove, or why that final $11,044 is a meaningful figure in understanding the fair distribution of tax burdens.

    I have started to do my own taxes. I pay about 25% of my total income in combined federal and state income taxes, Medicare, and Social Security. I’m not in the top 1%, but I do earn an upper-middle-class tenured professor’s income. I don’t do anything creative filing my taxes.  I don’t find these rates excessive, especially in light of the nation’s social and fiscal challenges.

    The top one percent–but also I believe those of us in the layer or two beneath them–should pay a bit more. Especially in a time when so many Americans are having trouble paying their mortgages or their medical bills, when so many are out of work, we should also whine a bit less.

    (HAP)

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    • This is worse than just being a whiner, it is totally misleading. Who cares what the tax rate is on taxable income; the important number is the effective tax rate on gross income.

      In the example constructed, obviously unrealistically but to illustrate an untenable position ($25,000 mortage interest implies a $500,000 debt for a person with $75,000 of income, gimme a break) the individual in the illustration had gross income of $75,000 and taxes of $12,473. That is less than a 20% effective tax rate. That may be high, but it is not 102%.

      In the article the Mr. Ross had an effective tax rate of 20% on AGI, meaning he is a self described 1% er and pays less than 20% taxes on gross income. .

      Thanks for bringing to everyone’s attention this bogus fabrication of a story.

    • I would not mind paying more taxes if it was needed to help the poor but I think that most of the money is poorly spent and that the system of benefits is design to fool people into thinking that the politicians are giving them something for free.

      Take defense, it is way over funded. The US spend more on defense that the next 10 highest spenders combined.
      Take schools, people perceive them as free but the middle class and rich surely pay for the full cost (and my county spends more than double per child what I spend to send my child to a private school and the private school does no worse a job).
      Take SS, generally the less you need the money the more the system gives you.
      Take medicare it allows you ignore the real full costs of your decisions and does less to squeeze providers than it could. Further it is a federal Government program while the states regulate most medical care and so can the states can drive up cost that the Fed Government will have to pay.

      I think that Fed state and local governments should collect less taxes than they do now!