WASHINGTON, April 12, 2013 — You work hard all year for your money and then comes April 15 and the tax bill. If you’re lucky and have itemized deductions, you will get a refund, but taxes still sting, especially for the middle class that pays more than its fair share.
Lots of people, especially Republicans, have fallen for the line that the top one percent loves to promote: They pay their fair share; in fact, they pay more than they should and their taxes need to be cut even further. Sadly, too many in Congress believe them. Don’t you.
It’s a shell game the super wealthy love to play, whining about how tough life is for them as they move their money around, especially into offshore accounts, called tax havens. The truth is that their incomes have been soaring while middle class wages have stagnated or even dropped. That’s why, even with a job, it is still a daily struggle for most American families.
So how rich are the super rich? Beyond your dreams and it has all happened in the last decade, though the vast accumulation of wealth in the hands of the very few began to grow during the Reagan and Clinton years.
Just watch the video below: “Wealth Inequality in America” and you will be outraged at how you have been bamboozled.
Now let’s look at taxes, which again for the wealthiest amongst us are the lowest since 1945 when it was 94%. Under President Reagan from 1982 to 1986, the tax rate was 50%.
As of January of this year, it is 39.5%, but don’t start crying for your poor millionaire friends, many of whom sit in Congress. That’s not the real amount they pay. Just ask former GOP presidential candidate Mitt Romney who only paid 14.1% on a net worth of $250 million or billionaire Warren Buffett who paid a mere11% in 2011.
How do they it? Besides having great tax accountants and tax lawyers in their employ, they take advantage of some wonderful loopholes and deductions, ones that President Obama would like to see closed.
Surprisingly, if you look closely, you will see some of the middle class’ most beloved deductions, like home mortgage, do not benefit them as they do the Romneys and Buffetts of this world.
1. Capital gains:
If you get most or all of your income from long-term capital gains (stocks and bonds held for more than a year), then you are taxed at 15%.
The top 5% of taxpayers earn their money through long-term capital gains, which is why the Romney and Buffett paid so much less than you. For instance, Buffett only pays himself $100,000 a year, thus avoiding that pesky personal income tax most of us pay.
The capital gains exception costs the U.S. government $38.5 billion in 2012, according to the Office of Management and Budget.
2. Charitable deductions:
According to the new 2013 tax brackets, if you give a $1,000 to charity and are only in the 15% income tax bracket, you would get $150 back on your taxes, if you itemized. However, if you and your spouse are in the 39.6% bracket, earning $450,000+, you will get back $450 for every $1,000 you gave. And that’s even if you end up in the 15% bracket because of your capital gains. Stop and think about the return on that $1,000 contribution; it’s almost 50%.
Yet those charitable contributions cost the government $53.7 billion in fiscal 2011.
3. Mortgage deductions:
Mortgage deductions, which were instituted to encourage homeownership, have benefited millions of people in the middle class. But again, just how much is that benefit worth to us?
Households earning between $40,000 and $75,000 received an average home mortgage deduction of only $523, but households with incomes of $250,000 and up have write-offs averaging $5,459 or ten times a much as the middle class homeowner. This finding is not from some lefty organization but from The Wharton School of Business at University of Pennsylvania.
4. Retirement Savings:
Even when you think you are saving your nest egg for your golden years in a tax-deferred retirement plan, you are still not doing that well, according to the Tax Policy Center, which points out that the top 20% of income earners enjoy 80% of the tax write-offs for retirement savings, while the bottom 60% tax payers get only 7% of that tax savings.
And again the government lost money to the tune of $142 billion a year in 2011.
So if you are in an ill-temper as we head into tax weekend, when many people will be at the dining room table surrounded by mounds of paper or before their computers, pulling their hair out in frustration, know you have plenty of company: America’s long-suffering and now dwindling middle class.
If you want to do more than curse the darkness, start bugging your senators and representatives for tax reform so that we all pay our fair share.
And for those of you who think a flat tax is the quick fix. Think again: the middle class will still pay a higher percentage of their income in taxes than the folks in the Millionaires Club. But that’s another column for another time.
To contact Catherine Poe, see above. Her work appears in Ad Lib at the Communities @ WashingtonTimes.com. She can also be heard on Democrats for America’s Future. She is also a contributor to broadcast, print and online media.
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