Sunday, September 26, 2010

How the "Income" Tax Rate for Poor People is Higher Than the "Income" Tax Rate for Rich People

How the "Income" Tax Rate for Poor People is Higher Than the "Income" Tax Rate for Rich People

The last time I checked, the constitutional definition of income is “Profit from Corporate Activity” and an “Income Statement” shows you how much profit a corporation has made. The reason I mention this is because Income means Profit in any other situation other than a personal tax return. Revenues aren’t taxed…only profit is. The same should hold true for individuals. After all if a corporation can be afforded the rights of an individual then an individual should be afforded the same rights as a corporation. Let’s say that it takes about $2000 per month for an individual to survive in Orange County . Everything above that should be taxed as profit (or disposable income) in order to be fair and it should be a flat tax. Check it out…

Here’s how the system we have works for federal taxes only (not including sales taxes, property taxes, state taxes, gas tax…ect.)

Monthly Wages $3500
Cost of Living $2000
Disposable Income $1500
Tax Rate 25%
Taxable Wages $3500
Taxes Paid p/Mo $875
% of Income Paid in Taxes 58%

Monthly Wages $20,000
Cost of Living $2000
Disposable Income $18,000
Tax Rate 35%
Taxable Wages $20,000
Taxes Paid p/Mo $7000
% of Income Paid in Taxes 39%

Here’s how it should work

Monthly Wages $3500
Cost of Living $2000
Disposable Income $1500
Tax Rate 40%
Taxable INCOME $1500
Taxes Paid p/Mo $600
% of Income Paid in Taxes 40%

Monthly Wages $20,000
Cost of Living $2000
Disposable Income $18,000
Tax Rate 40%
Taxable INCOME 18000
Taxes Paid p/Mo $7200
% of Income Paid in Taxes 40%

If you really look at the numbers above you see that the lower your wages the higher your INCOME tax rate is. If you took into account all the other taxes that the average person has to pay as a % of their income, their INCOME tax rate would be significantly higher. Also, if you took into account all the tax breaks that rich people can take advantage of (capital gains taxes are only 15%, mortgage interest is tax deductible…ect) you would see an even wider gap between the income tax rates that poor people pay vs. rich poeple.

31 comments:

  1. Aint dat a bitch.Aint dat a bitch.

    ReplyDelete
  2. Just saw this ... it seems to make sense ... I do have this question ...

    How do you define "Cost of Living?"

    Is it based on location? If so, what happens to the person who moves from one location to another during the year? Is it based on metro area? City? Zip code? Neighborhood?

    What if one survives by couch-surfing and/or house-sitting? They have a mailing address but no fixed residence - how does that work?

    If Cost of Living is not based on location, what does it include?
    Rent/Mortgage?
    Car payments?
    Food? Does this include eating out?
    Health care? Would this include basics, like ibuprofen and benadryl, or only clinic/hospital/insurance costs?
    Auto insurance? Gasoline? Oil changes? Replacement muffler?
    Life insurance? Renter's/homeowner's insurance?
    Bus/subway tickets?
    School supplies? Textbooks?

    I don't disagree with your premise - it does seem to make sense. My concern is more finding a way to implement it "fairly." How is that done?

    Would it be best to simply have a standard exemption (a much larger one than exists now) for everyone across the country?

    ReplyDelete
  3. There are a good deal of things wrong with this post. Firstly, the bottom 40+% percent of Americans pay little to NOTHING in federal income taxes through subsidies, tax credits and deductions.

    Secondly, the highest income bracket has other options to shield their money though charity contributions, shock dividends and off shore accounts. The average (smart) millionaire can easily find ways to pay closer to 15% in federal taxes than the 35% it is currently set at.

    Thirdly, Corporate taxes are were you should be focusing your attention, they have the money to donate to political campaigns and effect tax laws to their benefit and our detriment. I cite GE paying $0 in federal income taxes in 2010 after making $200 billion+ in profit.

    Lastly, the INCOME, Real estate and inheritance taxes should be 0%. The government has no right to steal it's citizens money. Consumption taxes are the way to go and balanced budget amendments to the constitution should follow.

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  5. not to say I don't disagree with you but there there are some errors in your logic

    ReplyDelete
  6. I like the way you think, but if I agree to trade my time for anything less than a few hundred an hour there's no profit. If I save my money and make money from buying and selling paper instruments than that seems to be a profit... Munies, stocks..... More or less I find that only the corporations and mega wealthy should pay taxes. If I can

    ReplyDelete
  7. How is cost of living defined, the $20,000 per month probably has a bigger cost of living then a $2000 per month earner. Why not make it real easy.
    Total income multiply by .10 = Your tax

    ReplyDelete
  8. How about we all forget about the outdated and rather unconstitutional philosophy of a "progressive" income tax? How about we adopt something new if we are to be taxed? How about we tax things instead of people? I'm suggesting we adopt a National VAT (Value Added Tax). Its fair, everyone pays their "fair share". Even the unemployed and criminals who don't have to report or pay income tax? We all buy stuff, so what better way to ensure we all pay into the Federal piggy bank. Either that, or we cut spending to actually match revenues. Just an idea, but undoubtedly brilliant.

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